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http:/These latest four closures also highlight the fact that the banking woes are not limited just to the largest banks; to the contrary, the bank failures increasingly seem to involve the smaller community banks. Three of the four most recently closed banks had assets below $500 million, and many of the other banks closed this year also were similarly smaller banks.
One generally accepted definition of a community bank is a banking institution with assets below $1.0 billion (refer here). By this definition, 25 of the 29 banking institutions that have failed this year are community banks, as only four the failed banks had assets over $1 billion. Indeed, most of the failed banks are very small; only seven of the 29 banks that have failed in 2009 had assets over $500 million.
For many years, and even throughout the recent financial turmoil, community banks have been viewed as relatively safe. Their lack of involvement both in commercial lending and in subprime loans seemingly spared them the most significant problems that have characterized the current crisis – until now. The growing problems in residential real estate and rising unemployment levels are raising problems even in the community banking sector, as the bank closures described above demonstrate. Based on the 2009 bank closures, the community banking sector may now have become the leading edge for problems in the banking sector.