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Mid-tier banks face their own troubles

TEXT OF STORY

Steve Chiotakis: Megabanks have released some pretty dismal numbers of late. And now smaller, more regional banks are posting some sour information too. Ohio-based Fifth Third Bancorp this morning posted a $2.2 billion quarterly loss, its third straight. But mid-tier banks, as they're known, have other things to take into account that differentiates them from the bigger siblings. Here's Marketplace Mitchell Hartman.


Mitchell Hartman: The banking sector as a whole is suffering, with banks writing down assets and setting aside loan-loss reserves as fast as they can. But as Erik Oja of Standard & Poor's explains, not all banks are hurting the same.

Erik Oja: A lot of these mid-tier banks specialize in bread-and-butter commercial lending. They're a lot less complex than, say, a Citigroup or a JP Morgan in terms of their securities holdings and their exposure to derivatives.

Oja says the mid-sized banks in the most trouble are those that chased the housing bubble outside their regions, lending to builders in places like Florida, Nevada, and California. That includes Comerica and Fifth Third, and Marshall and Ilsley.

But Oja says even banks that stuck with safer lending in local markets will be playing clean-up throughout 2009, setting aside additional reserves as borrowers get behind on their loans or stop paying altogether.

I'm Mitchell Hartman for Marketplace.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.
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Pardon me for making a slight correction in this article.

COMERICA bank is not based in Ohio, in fact it does not have a single banking office in that state.

COMERICA has its origins in Michigan ($23 billion of deposits & 230 offices), but recently moved its headquarters to Texas ($4 billion of deposits and 78 offices), and it is also in California ($13 billion of deposits and 83 offices) as well as less than one-quarter of a billion in each of Arizona and Florida.

I should also point out that FIFTH-THIRD BANK and also MARSHAL & ILSLEY BANK each operate banking offices in several counties of Florida, before they started pumping so many loans into that state.

For the sake of full disclosure, I should note that I have been investing in, and closely following the banking industry since 1973, and I sold my shares of Fifth Third as well as M&I back in 2006. I have never owned shares of Comerica.

Sincerely,
GARY M KLEIN
Keizer, Oregon

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