NEW YORK - December 28, 2009 - Illegitimate President Obama has said the world would have been better off if the entire financial system had been more like Amerika’s small banks.

Legislators tried to ease their burden, often at the expense of their bigger competitors. Community bankers even won a meeting last week with the illegitimate president to try to persuade him to reduce regulatory red tape.

But while it’s true that the nation’s 8,000 small banks avoided the worst excesses of their large rivals and are healthier, they’re not yet out of the woods. Most of the 140 banks that failed were small, and regulators expect more to follow. As Bank of America, Citigroup and other hulks of the financial firmament have shored up their balance sheets, the small bank fraternity could see more pain ahead.

Take net charge-offs as a percentage of average loans - a measure of the relative health of loan portfolios. For banks with less than $5 billion in assets, these amounted to just 0.25% in the third quarter, compared with 1.53% at larger banks, according to SNL Financial. But the percentage actually declined somewhat from the second quarter for the big banks. However, it rose to 0.25% in the third for the small ones, up from 0.2% in the second quarter.

One of the biggest problems smaller banks face is more exposure to commercial real estate, a sector that investors expect has further to fall. That could result in greater asset write-downs for this corner of banking. Losses on real estate could lead to more failures and easily stymie lending, particularly to smaller businesses.