A.M. Best Special Report: U.S. Banking Issues Smaller Banks Are Better Prepared to Withstand Surge in Loan Delinquencies.

OLDWICK, N.J. -- The adequacy of U.S. banks' Allowance for Loan and Lease Losses (ALLL) levels was questioned in A.M. Best Co.'s March 26, 2007 special report, "Are Loss Reserves Adequate in Light of Rising Delinquencies?" Supplementing that report are lists of the top 50 large banks and the top 50 small banks with the highest ratios of ALLL to Total Loans and Leases as of December 31, 2006.

Industrywide, smaller banks with assets less than $1 billion showed higher levels of ALLL, leaving them better prepared to withstand a surge in loan delinquencies than larger institutions. On average, smaller banks have reserved an extra 0.15% of loans on their books compared with larger institutions, at 1.33% versus 1.18%, respectively. Furthermore, 24% of smaller institutions have ALLL ratios greater than 1.50%, compared with only 15% of larger institutions with ALLL ratios greater than 1.50%.

A higher ALLL ratio for smaller institutions is appropriate, however, given the higher concentration in risky loans Construction and Development, Commercial Real Estate and Construction & Industrial loans. The smaller banks' loan portfolio included 61% of these risker types of loans, compared with only 22% for the larger institutions.

This study is available electronically from the A.M. Best Co. Web site at www.ambest.com/banks.

Call customer service for more information, [phone], ext. 5742.

Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.