From the FDIC Chief Economist Richard Brown's Testimony before the US Senate Banking Committee, June 13, 2013, "Statement of the Federal Deposit Insurance Corporation by Richard A. Brown, Chief Economist, on Lessons Learned from the Financial Crisis Regarding Community Banks before the Committee on Banking, Housing, and Urban Affairs, United States Senate; 534 Dirksen Senate Office Building, June 13, 2013:"
As the Committee is well aware, the recent financial crisis has proved challenging for all financial institutions. The FDIC’s problem bank list peaked at 888 institutions in 2011. Since January 2008, 481 insured depository institutions have failed, with banks under $1 billion making up 419 of those failures. Fortunately, the pace of failures has declined significantly since 2010, a trend we expect to continue.*** In my testimony, I describe some key lessons from the failures of certain community banks during the recent crisis identified by the FDIC Community Banking Study. Consistent with the studies performed under P.L. 112-88 by the FDIC Office of Inspector General (OIG) and Government Accountability Office (GAO), the Study found three primary factors that contributed to bank failures in the recent crisis, namely: 1) rapid growth; 2) excessive concentrations in commercial real estate lending (especially acquisition and development lending); and 3) funding through highly volatile deposits. By contrast, community banks that followed a traditional, conservative business plan of prudent growth, careful underwriting and stable deposit funding overwhelmingly were able to survive the recent crisis.
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