Sunday, November 09, 2008

Small Banks Thrive

There was a great article in the NY Times yesterday on the advantages of small banks. Cited as an example is the First National Bank of Orwell, a $36 million bank in Orwell, VT. Founded in 1832, it is Vermont’s smallest bank. Loans are up 22.6% from last year while deposits are up 7%. The picture on the right is Mark Young, president of the bank, with a customer.

The Federal Reserve wants small banks like this to go away, hoping that their TARP program will help to eliminate over 1,000 small banks. Bad decision!
Look at the graphic below which shows returns and charge-offs for banks in the USA by size. Returns are highest and charge-offs lowest for small banks! Why would you want to eliminate them? What are the Feds thinking?

1 comment:

Anonymous said...

Nice to see customer service at all levels... Small banks still are a vital part of all communities where as Federal Reserve is owned by the big banks who do not like the competition of non members... Small banks are the real ICON of the financial system...