ONE TYPE OF LOAN CAUSES SMALL BANKS

TO FAILBrian S. McDaniel

BANK FAILURES (2008-2011)

WHAT CAUSED FAILURES? Largely Related to Nonperforming R/E

LoansCommercial Real Estate (CRE)Acquisition, Development, and Construction

(ADC) Highlight the Impact of Impairment

Accounting and Loan Loss Provisioning

KEY FINDING 1Credit Losses and Charge-offs Contributed to Failures

Fair Value Accounting Did Not Contribute

KEY FINDING 2Current Accounting Practices May Have Delayed Reporting

KEY FINDING 3FDIC Attracted Bidders at Least Cost to the Deposit Insurance Fund

Health Banks Balked

MIXED COMMUNITY IMPACT Market Concentration Did Not Shift

8 of 188 metropolitan areas met criteria5 of 68 rural communities met criteria

SOURCES http://

www.gao.gov/products/GAO-13-704T http://

www.gao.gov/assets/660/655193.pdf http://www.individual.com/storyrss.php?

story=177495625&hash=41aba5859000585f21d0680e6d8843f2