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Community Banks Weathering Recession Better Than Big Banks
Federal oversight agencies and regulators have repeatedly warned that failures of small and mid-sized banks are expected to escalate. While many have gotten a handle on problems arising from the housing crisis,top officials have said losses from defaults on commercial real estate loans maturing in the next few years now threaten to topple nearly 3,000 of the nation’s community banks.It’s true that bank failures and government seizures continue at a pace not seen since the savings and loan (S&L) crisis of the 1990s. Already this year, 50 banks have been forced to shut their doors, after 140 went under in 2009. Despite all the debris in the headlines, a new study shows that community banks appear better positioned to weather further economic deterioration than their larger competitors.The study, conducted by the Minneapolis-based bank consulting firm the BrandBank, examined financial data reported to the FDIC over the last five quarters from more than 8,000 institutions. The company found that banks with less than $1 billion in assets are “significantly better capitalized” and have set aside larger capital reserves for potential credit losses than banks with over $1 billion in assets.“The data is pretty convincing and it shows that most community banks have ... more
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