Will the regular banks in smaller cities go down before the conglomerates?

[Frustratedlady]

If our smaller banks aren't owned by these giants, will they have a better chance of surviving, or will the bigger banks take them down?

I think our banks have been responsible and diligent in following the rules, but who knows what they've learned from the big boys. I'm hoping bankers who were not greedy won't go down.

[Teaser]

1. Some, but by sheer force of numbers

most will survive.

The big banks appear to own most of the bad paper anyway...

[Fresh_Start]

2. depends on the market, I think

if they are in real estate markets which suffer outsize deflation, they probably won't do well either.

[brer cat]

3. Our small bank seems fine

I live in a very little town. The bank has 4 branches total. Their LED signs are saying...come in for loans, mortgages, refinance...low rates. They know the local market and seem to make wise decisions. They are family/local shareholder owned, about 100 years old. Rumor has it that a couple of newer banks in town aren't doing so well. Glad I came on board when there was only one bank in town and stuck with it. They have always helped me out.

[Frustratedlady]

5. This is what I'm hoping, too. Honesty and fair play usually pay in the end.

But, times have changed so much, it's hard to tell what will happen. They are more invested in local businesses, farms, real estate, cars, home repairs, etc., and not into multi-million dollar expansions. Besides, our home values didn't inflate like the rest of the country...not as much, I should say.

[TexasObserver]

4. No! The problem is the big banks, not the small ones.

If you want to check out your bank, there are several online rating groups that rate banks by their soundness.

You will find the local banks tend to be very solid. The bad banking practices have been by the largest banks.

Here is one place:
http://www.bankrate.com/brm/safesound/ss_home.asp

[Frustratedlady]

6. Thank you for that link. Mine is a 4-star bank.

I checked the rest in town and they were 2 to 3 stars, so in this day and age, I feel pretty safe.

[TexasObserver]

8. Great! It's the big banks that made absurd bets on bundles of paper.

Local banks mainly get hurt if the communities in which they operate are areas which saw rapid appreciation of real estate where investment properties and second homes are prevalent.

If you live where people buy second homes, those prices often outpace the appreciation of regular residential communities during upturns, but they are the first to lose value in declines.

I wouldn't want to own real estate in southern Florida right now. And I wouldn't want to own bank stock of local banks in that area.

Please pass around the link, as people should know their local bank's level of soundness. You can do a search and find other rating groups. It's good to check more than one site, because they can vary by a star in their ratings.

[Abq_Sarah]

14. Excellent link!

My bank is a 5 star.

[TexasObserver]

16. Mine, too! Feels good to know, doesn't it?

Here's the irony: it was the practices of the 1980s that took down so many local banks which gave rise to the OVERSIGHT of local banks which has made them so strong.

They are a testament to the value of keen regulation of banking. Their soundness is not an accident or a coincidence. It results from stringent oversight by government examiners - The Office of the Comptroller of the Currency, to be specific.

[Abq_Sarah]

19. Oversignt isn't all

Three local banks with identical oversight have the following ratings: (1)* (2)*** (3)*****

The five star bank is far more careful about who receives loans and where they invest their money.

[TexasObserver]

20. The oversight is the reason we have the ratings.

The ratings are based upon the reports by the bank examiners, who require banks which own non performing loans to write them off against the bank's equity. By doing so, they reveal the banks which are over leveraged and under capitalized.

Oversight is what gives us the ability to know which ones are in trouble.

Oversight acts as a limiting agent on excess, but it doesn't prevent too many bad loans from being made. It merely keeps them from being carried on the bank's books as performing assets, which in turn deprives the bank of the ability to make more bad loans.

Oversight is vastly better than a lack of oversight.

[ProgressiveEconomist]

17. An analyst at RBC takes the opposite view, and names names

of banks with high and low "Texas ratio" predictors of insolvency.

From http://news.google.com/news?hl=en&tab=wn&nolr=1&q=%22bank+failures+may+reach+1000+on+bad+loans%22

"Bank Failures May Reach 1,000 on Bad Loans, RBC Says (Update2)

By David Mildenberg and Margaret Chadbourn

Feb. 9 (Bloomberg) -- As many as 1,000 U.S. banks may fail in the next three to five years, almost double the one-year tally at the height of the saving-and-loan collapse, as losses mount on commercial real-estate loans, RBC Capital Markets analysts said. Most of the failures will probably occur at banks with less than $2 billion in assets as their commercial customers default, said Gerard Cassidy, an analyst at RBC, in an interview today. ...

The FDIC has already raised the estimate for the cost of U.S. bank failures through 2013 after fourth-quarter financial reports from banks signaled possible additional losses to the deposit insurance fund. The agency said failures through 2013 may cost more than the $40 billion estimated in October. The U.S. seized 534 lenders in 1989, including 327 saving- and-loan associations, during the peak of a crisis among thrift institutions, FDIC data showed. The FDIC on Dec. 16 doubled premiums it charges banks to replenish its reserves, which totaled $34.6 billion as of the third quarter. The agency and Congress are taking steps to offer safeguards for the banking industry, including more than tripling the FDIC’s borrowing authority from the Treasury Department, to $100 billion, to support consumers against bank failures. “The sooner the bank regulators can shut down the troubled banks, the faster the industry will get back on its feet,” Cassidy said in the report. “We are nowhere near
the end of this down leg in the current credit cycle.”

Cassidy had previously said as many as 300 banks would fail in the next three years. RBC bases its estimates on discussions with industry experts and by calculating the loans for which banks aren’t receiving interest as a percentage of tangible capital and reserves for losses, Cassidy said. RBC calls it the “Texas ratio” because it was crafted during the state’s 1980s bank crisis. RBS said lenders that exceed 100 percent are at risk of collapse. While the RBC benchmark tops 100 percent for dozens of small U.S. banks, RBC Centura’s research shows two of the 50 largest banks have Texas ratios in excess of 50 percent. Sterling Financial Corp. of Spokane, Washington, is 54 percent, and Colonial BancGroup Inc. of Montgomery, Alabama, is 53.4 percent, RBC said. ...

Bank of America Corp., the largest U.S. bank, has a Texas ratio of 21.6 percent, compared with No. 2 JPMorgan Chase & Co.’s 5.6 percent and No. 3 Citigroup Inc.’s 18.4 percent. The U.S. is backing $301 billion of Citigroup securities and $118 billion at Bank of America, and injected $45 billion into each lender. ..."

[TexasObserver]

21. You've cited a opinion piece by a big bank toadie.

As I've said, most of our local banks are in good shape, it is the big banks that have made the long shot gambles which should be confined to casinos, not the banking industry.

[Xithras]

22. Untrue. A local bank chain just went under here.

County Bank was a small 39-branch regional bank here in Central California that served only a few cities. Several of my friends and family bank there, and it was definitely run like a small and local bank.

They went into FDIC receivership last week and were sold to WestAmerica, a larger conglomerate in the SF Bay Area.

[TexasObserver]

24. So one banking chain in one local market fails.

Of course there are local banks in trouble. I specifically said so in a post above. But generally speaking, the vast majority of sound banks are local banks, and the vast majority of local banks are sound.

There will always been local banks that fail, but there are many thousands of local banks.

If 500 local banks fail this year, it's news. Even then, it's less than 10% of such banks, and it still is not the reason for the banking crisis. The fault lies with the big banks, which made absurd bets on bundles of paper.

[Zynx]

7. Depends. There are a lot of insolvent small banks, but on balance a smaller percent

of them are screwed up than the big ones. Of the big ones, only JP Morgan, Wells Fargo, US Bancorp, and PNC seem to be in any kind of decent shape at all. Even there it ain't pretty. The rest are bordering on insolvency.

[wellstone dem]

9. Local banks

have generally done better so far. They didn't make bad loans to folks. But as people lose their jobs and aren't able to pay what were formerly good loans, the local banks will be in trouble.

[JerseygirlCT]

10. I think a fair number of community banks are in better positions

than the mega banks. They made loans the old-fashioned way, and are closer to the people they deal with - so they know a bit better what they're dealing with.

[WinkyDink]

11. My Sovereign Bank was just bought by Santander of Spain.

[Baby Snooks]

15. Compass Bank was bought by a Spanish bank two years ago...

Compass Bank is owned by Banco Bilbao. Apparently they are doing quite well. Apparently they didn't care for American mortgages.

It is odd that Spanish banks are buying American banks. Of course that's not that odd in Texas. Our governor seems to like Spain. His planned "superhighway" that is being "reincarnated" was basically sold to a Spanish company. He'd sell the entire state if he thought he could get away with it.

[Abq_Sarah]

12. The majority

Of community banks in my town are financially healthy. They didn't issue loans to people with dubious means to repay and they didn't issue lines of credit to businesses that couldn't demonstrate good financial health. The one bank that's in trouble operates in 4 other states and they took a big hit on housing loans.

[Still Sensible]

13. Many smaller banks didn't participate in the post-regulatory

bullshit schemes that got the greedy big ones in this mess. Most in my area seem quite strong... except they are not loaning as much right now (because their big bank sources aren't loaning to them at the same rates they were).

[amborin]

18. the regionals are teetering on the verge of total crisis

they hold much of the commercial mortgages, which are coming due in april....many are already defaulting....

the second wave of banking disaster...not covered by the bank bailout either....

[jazzjunkysue]

23. MY USA branch isn't so good, but it's parent international is superb.

So, if my USA needs help, it can get it from it's own parent. That's what happened in the UK: They got their own bailout from their own parent.

http://www.forbes.com/forbes/2008/0421/140.html