Today’s economic environment is a challenge for U.S. citizens, investors, businesses, and banking institutions. There have been several recent bank failures led by Washington Mutual, and uncertainty as to how many more failures may occur is a growing concern. The banking industry is working hard to insulate itself from this troublesome economy. First Bank Corporation is a case in point! First Bank owns four affiliated community banks with 33 branches operating throughout Michigan. Often referred to as a super community bank holding company, First Bank subsidiaries offer a full range of deposit and loan products designed to meet the needs of its community and local businesses. In recent years, First Bank Corporation has witnessed a growing trend in bank consolidations, both locally and at the national level. Ten years ago, there were approximately 15,000 banks in the United States. There are roughly 9,000 banks today, and in the future this number could consolidate to 5,000 or 6,000 banks.

1. First Bank Corporation points to its strategy of decentralization as a big factor in its success. What are some possible disadvantages to its strategy of decentralizing its subsidiary banks?
2. What are some business actions that First Bank can take to continue its record of above-average industry earnings?
3. Given the 40 percent consolidation in the number of banks over the past ten years (from approximately 15,000 to 9,000) and the forecasted decline to 5,000–6,000 banks in the future, what can First Bank do to avoid being taken over by a larger competitor?