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Community banks find footing, still searching for revenue (quotes from Ed Sibbald)

By Adam Van Brimmer

The community banking crisis is winding down.  Business for the small banks is far from ramping up, however.

Even as all eight locally based community banks showed improvement in 2012 – five of them posted year-end profits – loan demand continues to weaken and fee income remains in a downward spiral.

Total loans dipped on a year-over-year basis, even with a drop in failed loans that had undercut loan portfolios throughout the recession and the early days of the recovery. The pace of new loans has not kept up with the pace of payoffs or charge-offs, which are the loans banks deem uncollectable, take as a loss and remove from their portfolios.
And the fewer loans, the less interest income for the banks.

As for fees, non-interest income fell by 12 percent for the group. New regulatory guidelines and a competitive service environment have contributed to the drop.

“If you’re a banker and you’ve cleaned up all your problems and you’re ready to get on with business, you have to be asking yourself, where are the profits going to come from?” said Ed Sibbald, the director of Georgia Southern University’s Center for Excellence in Financial Services. “You’re not going to make it up with fees, and most can’t cut their expenses any more than they already have.”

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