ICBA: Fifty-Five Percent of Community Bank Survey Participants Saw an Increase in Deposits

Survey illustrates financial crisis’ impact on community banks

WASHINGTON, DC – March 10, 2009 – The Independent Community Bankers of America (ICBA) and Aite Group, LLC, released a report today entitled, The Impact of the Financial Crisis on U.S. Community Banks: New Opportunities in Difficult Times. The report, which is based on information gathered through a February 2009 survey of 743 community bank respondents, examines the impact of the current financial crisis on community banks.

 “While the financial crisis has affected banks of all sizes and in all regions, community banks continue to lend and are typically faring much better than the larger banks because they didn’t participate in the high-risk activities that led to problems we are experiencing,” said ICBA President and CEO Camden R. Fine. “This survey clearly shows that the vast majority of community banks are well-positioned to survive the economic downturn and, perhaps, even reclaim some of the customers from larger banks.”

Survey highlights include:

• Of the community banks surveyed, 55 percent have seen an increase in deposits as a result of new customer acquisition. Only 17 percent have had customers withdraw deposits from their institutions.
• Community banks are acquiring new customers at a faster rate than in the past. Of the community banks surveyed, 57 percent saw an increase in new retail customers during the third and fourth quarters of 2008 compared to the first half of the year, while 47 percent saw an increase in new business customers.
• Community banks are still lending, and 40 percent have seen an increase in loan origination volume over the last year. Only 11 percent believe the crisis has “significantly” curtailed their institution’s ability to lend. Economic compression and mixed messages from the U.S. government are key factors driving down loan activity.
• Despite most community banks’ lack of participation in subprime lending, the implications of larger bank activities have begun to trickle down. Of community banks surveyed, 73 percent have seen an increase in their traditionally low loan delinquencies and charge-offs since the start of the crisis. The significant growth in quarterly net charge-offs for the industry is driven primarily by the largest banks.

“By striving to serve their customer’s best interests without straying from traditional practices, most community banks have been able to grow deposits, acquire new customers, better position themselves in the eyes of customers and maintain stable financial statements,” says Christine Barry, research director with Aite Group and author of this report. “Some community banks feel they are seeing more opportunities today than they have in the past several decades. But in order to remain competitive with larger banks, community banks must continue to strengthen their operations and better leverage technology throughout the crisis.”

For more information about the survey, please visit http://www.icba.org/.

About ICBA

The Independent Community Bankers of America, the nation’s voice for community banks, represents nearly 5,000 community banks of all sizes and charter types throughout the United States and is dedicated exclusively to representing the interests of the community banking industry and the communities and customers we serve. For more information, visit www.icba.org.

 About Aite Group, LLC

Aite Group is a leading independent research and advisory firm focused on business, technology and regulatory issues and their impact on the financial services industry. It was founded by leading industry experts in Banking and Securities & Investments. Aite Group brings together a team of business strategy, technology and regulatory experts to deliver comprehensive, timely and actionable advice to financial institutions and technology vendors. It seeks to become a true partner, advisor and catalyst by exchanging ideas with and challenging basic assumptions of its clients, ensuring that they always stay one step ahead of the competition.