Small banks facing severe loan losses and in need of capital continue to operate, indicating a reluctance on behalf of regulators to shut them down.
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Experts note that the majority of the 8,000 small banks are still thriving. But the outlook for this corner of the nation's banking industry has been tempered in recent weeks as small lenders endure rising losses, partly as a result of exposure to areas like commercial real estate and small business loans.
Next Wednesday, Wall Street will get a clearer sense of what kind of shape the industry is in when the Federal Deposit Insurance Corp. publishes its first-quarter assessment of the industry. One closely-watched part of that report is the agency's so-called "problem bank" list.
As of the end of 2008, that number stood at 252 institutions and it is expected to have climbed even higher during the first three months of 2009.
So far this year, the government has closed 34 banks....While only a fraction of the institutions on the problem bank list typically reach the point of failure, experts contend that regulators have been unable to shut down some "zombie" lenders, in part, because they are still scrambling to catch up with the variety of ills affecting the sector.
Zombie banks still walk among us - May. 25, 2009
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