Credit Crunch Intensifying For Small Businesses And Banks?

For the past few months I've been writing about how the status of community banks in this financial crisis has been often overlooked. The story has been that they are not in nearly as much trouble as the big banks, and are still pursuing fruitful relationships with small businesses. But via Jeff Cornwall, I see some evidence that might not be true in some cases:

A NashvillePost.com analysis of Federal Deposit Insurance Corp. third-quarter filings shows that four of the top nine banks based in Middle Tennessee or doing most of their business here trimmed their loan portfolios from July to September. Among them were No. 2 GreenBank and No. 5 Bank of Nashville, the latter of which chopped $85 million from its books during the quarter.

and

Wynne Baker, member in charge of KraftCPAs’ banking practice, said that dichotomy sets up that group for further growth in 2009 while the banks cutting back will essentially be in a holding pattern.

“I don’t think this quarter will be any better,” Baker said. “I would imagine that regulators are telling them to take a hard look at their whole portfolio and see where they are.”

This is a far cry from the community banker I interviewed in October who said, "By and large, we're going on as we always have."

Also today, we have the New York Times reporting on various small businesses facing "stomach-churning" difficulties in maintaining their cash flow due to tight lending.