Banks are inherently a 'bigger the better' business. A bank serving a single town goes down with the town, so you diversify to the next town over. Diversifying means now your depositors are less correlated and you have more scale for things like apps and online stores, and you have much more predictable losses on your credit portfolio. Bigger banks are more able to adapt to new technology (community banks have been the biggest lobbyists against most technological innovations in banking, and is part of why FedNow is taking so long to roll out). It's kind of like insurance: they can only exist because they offload some of their risk to bigger companies; the bigger you are the more efficient you become.

I mentioned in another comment about how most small banks closely tied to the local business environment and especially CRE markets. The difference between a single CRE developer being 5% of your portfolio when you're one tiny bank and 0.5% when you're a slightly larger bank is massive. You scale that up even more and banking gets more reliable and easier to manage the larger the banks are.

The fewer banks there are, the easier it is to provide oversight and regulate them. You have fewer institutions to coordinate when trying to push big changes, and what fewer institutions do exist are more resilient and able to absorb larger losses.