Middle Class Banks Get Squeezed in the Financial Crisis

Just as the middle-class arguably gets hardest hit in any economic downturn, mid-sized banks are taking the brunt of the recent banking crisis.

Two recent cases in point: Houston, Tex.-based Franklin Bank and Security Pacific Bank of Los Angeles both bit the dust on Friday, the latest U.S. banks felled by the mortgage crisis. These closures bring the tally of failed U.S. banks to 19 for this year alone.

Franklin will have its $3.7 billion in deposits assumed by Prosperity Bank of El Campo, Tex. Meanwhile, Pacific Western Bank will acquire $450.1 million in deposits from Security Pacific. In addition, Prosperity will purchase another $850 million of Franklin's assets and Pacific Western will buy $51.8 million of Security Pacific's assets; the FDIC will dispose of the remainder of the failed banks' assets later.

Certainly, the high-profile failures of larger financial institutions, like Washington Mutual and IndyMac have captured more headlines and arguably affected more customers. But for every WaMu or IndyMac debacle there are 10 times the number of regional or community banks, typically with deposits ranging from a few hundred million to a few billion dollars, getting shut down or taken over -- institutions such as Alpha Bank & Trust of Alpharetta, Ga., Ameribank of Northfork, W.Va., and the fittingly named Main Street Bank of Northville, Mich.

Larger and more stable bank competitors, many of whom have already snapped up deposits and assets from their fallen rivals, will likely continue their shopping spree as the failures mount. But perhaps the larger question remains: Will the recent credit crunch and financial industry fallout help herald the demise of the mid-sized bank?