WASHINGTON --- U.S. banks are failing at the fastest rate in two decades.
No, the financial crisis hasn't returned. Wall Street doesn't need another bailout.
But in communities around the country, 143 banks have collapsed so far this year -- more than all of last year. This time, the failed banks are smaller, on average, than in 2008 and 2009. The damage to the industry has thus been milder this time. Still, the wave of closings points to the persistent struggles of many communities and states.
On Friday, regulators closed four small banks: One each in Maryland and Washington state and two in California -- one of the hardest-hit states, where a dozen banks have failed this year.
As larger banks have regained their health this year, thanks in part to federal aid, smaller ones have struggled. Here's why:
- Small banks made the riskiest commercial real estate loans -- those used to develop apartment buildings, malls and industrial sites. Many such loans soured this year. About 13 percent of all bank assets consist of these high-risk loans. But for banks with $10 billion or less in assets, the figure is 28 percent, according to government data.
- Smaller banks didn't receive the taxpayer aid given to Wall Street banks. The big banks recovered in 2009 with help from federal bailout money and fees on bank services. And unlike small institutions, large banks have profited from their investments in the resurgent financial markets even as they've reduced lending in distressed areas.
- The smaller banks haven't had to bolster their financial health as much as larger banks have. Regulators forced big institutions to boost their capital cushions and write off bad loans early in the financial crisis. Not so for smaller banks. And unlike larger ones, many smaller banks are supervised by state banking departments that lack the resources or expertise to monitor them closely.
- Banks must write off bad loans as more borrowers fail to pay. And they must set aside money for other loans that might sour. That can endanger small banks with little extra cash.
The Peoples Bank in Winder, Ga., survived the Great Depression but fell in mid-September. It had about $447 million in assets and had been in business since 1926.
"It was the anchor of downtown," said Chip Thompson, the mayor of the city of about 15,000 people about 130 miles northwest of Augusta.
Nearly 200,000 banking jobs have been lost in the past three years -- about 8.5 percent of the industry's work force.
"Banks that are holding on by their fingernails aren't going to be able to hold on that much longer," said Bill Bartmann, whose company buys distressed bank assets.
Analysts expect more small banks will fail. Estimates are for 160-200 banks to close this year, and a similar number next year.