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Community banks faring better than larger, chain banks

In spite of a national banking crisis and lending troubles, the number of people making deposits at locally operated community banks has increased nationwide according to a report by the Independent Community Bankers of America (ICBA).
The report involved a survey of 743 community banks in February.
Of the banks surveyed, 55 percent reported an increase in deposits due to new customers while only 17 percent reported customers withdrawing deposits, the report said. The number of new customers at community banks is also rising as 57 percent of surveyed community banks said they had seen increases in the number of new retail customers in the second half of 2008 compared to the first part of that year. As for business customers, 47 percent of the surveyed community banks reported an increase.
“Most community banks have been able to grow deposits, acquire new customers, better position themselves in the eyes of the customers and maintain stable financial statements,” according to a statement by Christine Barry, research director with Aite Group, LLC, and author of the report.
Several calls to the Arizona Bankers Association (ABA), a regional partner of the ICBA, were not returned.
But a handful of community banks in Arizona have reported similar upward trends in both lending and deposits.
Las Vegas-based Community Bancorp Inc., of which Community Bank of Arizona is a subsidiary, reported total net loans up about 3 percent and total deposits up about 13 percent in the third quarter of 2008 (the most recent reporting period available), compared to the fourth quarter of 2007.
Oklahoma-based BOK Financial Corporation, which owns banks in seven states including the Bank of Arizona, reported total deposits of nearly $15 billion in the fourth quarter of 2008 compared to roughly $13.5 billion in the fourth quarter of 2007. BOK also reported its loan portfolio had increased to $12.77 billion in the fourth quarter compared to $11.89 billion in the fourth quarter of 2007.
Since the start of the present crisis, however, 73 percent of the ICBA survey respondents reported an increase in loan delinquencies and charge-offs. Charge-offs are used to measure the percentage of outstanding loans considered “uncollectible debts” by the bank.
Western Alliance Bancorporation, a Las Vegas-based parent company that owns five banks including ABA member Alliance Bank of Arizona, reported its net loans in Arizona were up 10.45 percent and total deposits in Arizona up 4.17 percent in the fourth quarter. However, Western Alliance reported an overall 2,257-percent increase in net charge offs. Net charge offs in the fourth quarter of 2008 were 1.65 percent of the total loan portfolio, compared to .07 percent in the third quarter in 2007
In a press release related to the survey report, the ICBA attributed increase in “bad debt” to the lending practices of larger national banks.
“While the financial crisis has affected banks of all sizes and in all regions, community banks continue to lend and are typically faring much better than larger banks because they didn’t participate in high-risk activities that led to problems we are experiencing,” according to a statement by ICBA President and CEO Camden R. Fine.

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