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The State of Banking in 2012

Waypoint Private Capital explores the state of banking in 2012.

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State of Banking 2012

In late 2008 through early 2010, the commercial banks in the U.S. changed their focus from growth to survival and essentially stopped making new loans as they cleaned up their portfolios and shored up their capital base. Thankfully, most of the commercial banks are back to doing what they do best – lending money.

The chart below, which is based on published FDIC data, shows that commercial and industrial (C&I) loans, outstanding to middle- to large-sized companies, have been steadily growing since the middle of 2010 and are only 5% below their 2008 level. However, loans to small businesses have not seen such a rebound and remain more than 17% below their 2008 level.

commercial and industrial loan graph

Reasons For This Difference

  1. First, the number of commercial banks in the U.S. has decreased by over 13% since 2008. Many of the failed or merged banks were making loans to small businesses and those loans are not being picked up or renewed by the larger institutions.

  2. Second, while the banks were in their state of dormancy over the past few years, they figured out which customers were the safest and most profitable for the banks. Unfortunately, small businesses are often more risky and take a significant amount of time to service, so the banks are targeting larger customers.

  3. Third, the increased regulation and current regulatory uncertainty are putting the smaller community banks, which have historically filled the gap in lending to small businesses, in a defensive mode. Waypoint has seen a dramatic increase in the use of credit enhancements to offset both the regulatory and credit risks. The USDA and SBA provide much of this support with their guaranteed lending programs. We are fans of both programs and have helped clients and banks secure the appropriate guarantees.


About Waypoint Private Capital

Waypoint Private Capital is an investment banking firm that educates and advises middle-market, privately-held companies through critical stages of their business' life cycle. Waypoint helps business owners and entrepreneurs sell companies, buy companies, raise equity and debt capital for growth and recapitalization, and plan for a successful exit from the business.

To learn more visit or call us at 608.515.3354 or 918.633.2647 and speak with a Waypoint Private Capital expert.

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Steve Sprindis is co-founder and managing director of Waypoint Private Capital. © 2012 Waypoint Private Capital, Inc. All Rights Reserved.

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