‘THEY’RE KIND OF LIKE THE BRIGHT SPOT IN THE STORM’ Small banks buck subprime downturn

While subprime-lending problems pummel the country’s biggest financial institutions, many community banks are escaping unscathed — and bragging about it. That’s partly by circumstance: Small banks tend to favor commercial loans, not home mortgages. But it’s also because many stayed wary of making loans to people with shaky credit.

Now, some small banks in the Charlotte area are touting how they’ve sidestepped the subprime backlash, and tying that to their relatively favorable fourth-quarter returns. “They’re kind of like the bright spot in the storm,” said Karen Tyson, a spokeswoman for Independent Community Bankers of America. At giants like Charlotte-based Bank of America Corp. and Wachovia Corp., the subprime fallout is reverberating heavily.

Neither makes subprime mortgage loans, but both have traded in subprime-backed investments. Now, they’re blaming those investments for dismal fourth quarters. Fourth-quarter profits fell 95 percent at Bank of America, which wrote down $5.3 billion in mortgage-backed investments, and 98 percent at Wachovia, which wrote down $1.7 billion, largely because of subprime issues. Both watched their troubled loans, which include mortgages, more than triple from the year before.

Meanwhile, Citizens South Banking Corp., a Gastonia operation with offices throughout the Charlotte area, posted healthier numbers: Profits fell by about 11 percent, but the bank cut down on its troubled loans by 40 percent. Such banks are dramatically smaller than the likes of Bank of America and Wachovia. Bank of America has $1.7 trillion in assets, and Wachovia has $783 billion, compared with Citizens South’s $779 million.