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The financial condition of U.S. banks: how different are community banks?


  • R. Alton Gilbert
  • Gregory E. Sierra


This article examines the condition of the banking industry in the United States, with an emphasis on community banks. In spite of the recent recession, the condition of the banking industry is substantially better than during the recession of 1990-91. There has been an increase in problem loans at both large and small banks during recent quarters, and nonperforming loans have risen relative to the allowance for loan and lease losses. Among the banks in each of the size groups in this article, however, ratios of equity to total assets in recent quarters are at about their highest levels since the early 1990s. Output of an early warning model of bank distress, which converts individual measures of bank condition into an index number, indicates a substantial improvement in the condition of community banks and larger banks after the early 1990s. While the median probability of failure has been higher for community banks than for larger banks during recent quarters, the difference is very small. Trends in the ratings that supervisors have assigned to the banks examined during recent quarters are not consistent with the view that examiners have been detecting a systematic deterioration in the condition of community banks.

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  • R. Alton Gilbert & Gregory E. Sierra, 2003. "The financial condition of U.S. banks: how different are community banks?," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 43-56.
  • Handle: RePEc:fip:fedlrv:y:2003:i:jan:p:43-56:n:v.85no.1

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    1. Robert T. Clair, Gerald P. O'Driscoll, Jr., and Kevin J. Yeats, 1994. "Is Banking Different? A Reexamination of the Case for Regulation," Cato Journal, Cato Journal, Cato Institute, vol. 13(3), pages 345-365, Winter.
    2. Ben S. Bernanke & Cara S. Lown, 1991. "The Credit Crunch," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 205-248.
    3. Berger, Allen N. & Demsetz, Rebecca S. & Strahan, Philip E., 1999. "The consolidation of the financial services industry: Causes, consequences, and implications for the future," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 135-194, February.
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    Banks and banking;


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