Big Losses Loom at Small Banks

By Neal Colgrass,  Newser Staff
Posted May 18, 2009 8:15 PM CDT
Big Losses Loom at Small Banks
People enter First National Bank in Staunton, Ill., Wednesday, April, 8, 2009.   (AP Photo/Seth Perlman)

Small and midsize banks across America could face $100 billion in losses from commercial real-estate loans next year, shrinking their capital in most cases to scary lows. The Wall Street Journal conducted worst-case-scenario stress tests on 900 banks and found crises looming far beyond Wall Street. Small and midsize banks "are in just much worse shape" than major banks, one analyst said.

Facing losses that could top $200 billion in all, these mom-and-pops and bigger regional banks are unlikely to attract capital to shore up accounts. That could mean fewer loans, more regulations, and a slew of bank failures. But at least one bank denied the findings. "We don't see anything along the lines you're saying," said the chairman at Truman Bancorp, which plans to issue up to $10 million in shares to restore depleted capital.
(More banks stories.)

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