Small Banks Failing as Larger Firms Regain Health, Golden Networking's Private Banking Conference

Nov. 7, 2010 - PRLog -- (November 07, 2010, New York) According to Associated Press, “U.S. banks are failing at the fastest rate in two decades. No, the financial crisis hasn't returned. Wall Street doesn't need another bailout. But in communities around the country, 143 banks have collapsed so far this year - more than all of last year. This time, the failed banks are smaller, on average, than in 2008 and 2009. The damage to the industry has thus been milder this time.” Leaders will comment on the state of the banking industry at Golden Networking's 2nd Banking Leaders Forum, "Private Banking on the Brink of Transformational Change" on November 18th in New York City.

“On Friday, regulators closed four small banks: One each in Maryland and Washington state and two in California — one of the hardest-hit states, where a dozen banks have failed this year.

As larger banks have regained their health this year, thanks in part to federal aid, smaller ones have struggled. Here's why:

— Small banks made the riskiest commercial real estate loans - those used to develop apartment buildings, malls and industrial sites. Many such loans soured this year. About 13 percent of all bank assets consist of these high-risk loans. But for banks with $10 billion or less in assets, the figure is 28 percent, according to government data.

— Smaller banks didn't receive the taxpayer aid given to Wall Street banks. The big banks recovered in 2009 with help from federal bailout money and fees on bank services. And unlike small institutions, large banks have profited from their investments in the resurgent financial markets even as they've reduced lending in distressed areas.

— The smaller banks haven't had to bolster their financial health as much as larger banks have. Regulators forced big institutions to boost their capital cushions and write off bad loans early in the financial crisis. Not so for smaller banks. And unlike larger ones, many smaller banks are supervised by state banking departments that lack the resources or expertise to monitor them closely.

— Banks must write off bad loans as more borrowers fail to pay. And they must set aside money for other loans that might sour. That drain can endanger small banks with little extra cash. They hold a smaller proportion of safer loans than larger banks do. In the April-June quarter this year, banks with $10 billion or less in assets gave up on $13.6 billion in real estate loans that went bad. They had to reserve more capital for the next wave of souring loans. That reduced their earnings.

An additional problem is that unlike larger banks, smaller ones can lend only in their communities. If a local economy is weak, large lenders can tighten credit there. They can make more loans elsewhere. Small banks lack that option.

Despite the higher number of bank closings this year, the hit to the banking system has been less than last year. The assets of this year's failed banks totaled about $89 billion. That's scarcely more than half the combined assets of the 140 banks that failed in 2009. All but one of the 143 to fail this year had under $10 billion in assets. And about three-fourths of those banks had less than $1 billion.

"Banks that are holding on by their fingernails aren't going to be able to hold on that much longer," said Bill Bartmann, whose company buys distressed bank assets. Analysts expect more small banks will go under. Estimates are for 160-200 banks to close this year, and a similar number next year.”

2nd Banking Leaders Forum, "Private Banking on the Brink of Transformational Change", is produced by GoldenNetworking.net (goldennetworking.net), the premier networking community for business executives, entrepreneurs, investors and diplomats, founded by former McKinsey consultant and Columbia Business School MBA Edgar Perez. Upcoming Golden Networking's Forums and Business Receptions include:
•   High-Frequency Trading Happy Hour, (HFTHappyHour.com),  November 9th, New York City
•   2nd Banking Leaders Forum, "Private Banking on the Brink of Transformational Change" (BankingLeadersForum.com), November 18th, New York City
•   High-Frequency Trading Experts Workshop 2010, "Practical Implementation of High-Frequency Trading Strategies" (HFTExpertsWorkshop.com), November 22 & 23, Hong Kong
•   Public Finance Leaders Forum 2010, "How Private Funds Can Invest in Government-Owned Property and Public Projects" (PublicFinanceLeadersForum.com), December 2nd, New York City
•   High-Frequency Trading Happy Hour, (HFTHappyHour.com),  December 7th, New York City
•   2nd Private Equity Leaders Forum, "Setting the Stage for Radical Transformation in 2011 and Beyond" (PrivateEquityLeadersForum.com), December 9th, New York City
•   High-Frequency Trading Experts Workshop 2010, "Practical Implementation of High-Frequency Trading Strategies" (HFTExpertsWorkshop.com), December 9 & 10, New York

Golden Networking has compiled the insights of top experts and industry practitioners and produced DVD Video Packages for its Leaders and Experts Forums, including:
•   2nd China Leaders Forum DVD Video Package, "Is the Chinese Dragon Poised for Global Dominance or Economic Implosion?", ChinaLeadersForum.com
•   Distressed Investing Experts Forum 2010 DVD Video Package, "Analyzing and Valuing Distressed Companies, Securities and Real Estate", DistressedInvestingExpertsForum.com
•   Derivatives Leaders Forum 2010 DVD Video Package, "Strategies for Increasing Profits under an Evolving Regulatory Framework", DerivativesLeadersForum.com
•   High-Frequency Trading Leaders Forum 2010 DVD Video Package, "Innovating and Profiting from High-Frequency Trading in 2010 and Beyond", HFTLeadersForum.com
•   Hedge Funds Leaders Forum 2010 DVD Video Package, "Generating Alpha in Challenging Times", HedgeFundsLeadersForum.com
•   High-Frequency Trading Experts Forum 2010 DVD Video Package, "Starting and Running a High-Frequency Trading Operation", HFTExpertsForum.com
•   Distressed Investing Leaders Forum 2010 DVD Video Package, "Extraordinary Opportunities Investors Cannot Afford to Pass", DistressedInvestingLeadersForum.com
•   China Leaders Forum 2009 DVD Video Package, "Addressing the Challenges Posed by the Present Wave of Chinese Globalization", ChinaLeadersForum.com
•   Distressed Investing Leaders Forum 2009 DVD Video Package, "The Most Comprehensive Guide for Any Investor in Distressed Assets", DistressedInvestingLeadersForum.com

Panelists, speakers and sponsors are invited to contact Golden Networking by sending an email to info@goldennetworking.net. Golden Networking has been frequently featured in the press, including recent articles in The Wall Street Journal, "Happy Hour for High-Frequency Trading", The New York Times, "Golden Networking Helps Job Seekers Make Overseas Connections", Los Angeles Times, "Speed-addicted traders dominate today's stock market", Reuters, "Revamp looms as trading experts huddle at SEC" and Columbia Business School's Hermes Alumni Magazine, "10 Under 10".

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