Small banks healthy, still affected by credit crisis

Small banks have gotten little blame for the credit crisis, but are still feeling the effects. "The public, politicians and the media have made little distinction between the stress-tested behemoths and the 7,630 community banks across the country — the vast majority of which have watched the crisis like bystanders at a 10-car pileup," David Segal writes for The New York Times.

Although greatly outnumbered by national and regional banks, community banks have bypassed much of the fallout from the credit crisis because of their relatively small assets, but are still facing backlash. To deal with the negative image of the finance industry, community banks have promoted public relations campaigns stressing their fiscal health that include assurance meetings, cookouts and and clever signage like "Safe, Strong, Secure" at Demotte State Bank in Southern Indiana.

Beyond a loss of consumer confidence, community banks are facing increased bills from the Federal Deposit Insurance Corp., which is described by Segal as "basically an insurance fund underwritten by banks." After paying $42,000 last year, Demotte will now owe $500,000 or more because of failures in other parts of the country. Demotte's president, Donald E. Goetz, is grappling with the turn of events. “Isn’t that the American way?” he says, folding his arms. “Whoever is left standing, whoever was prudent, is always the one who has to pick up the pieces.” (Read more)