Numerous small and regional banks throughout the United States are experiencing significant strain, with concerns rising about potential repercussions.

According to Christopher Wolfe, managing director and head of North American banks at Fitch Ratings, some banks could face dire circumstances, potentially failing or falling below their minimum capital thresholds.

Klaros Group, a consulting firm, conducted an analysis of approximately 4,000 U.S. banks, identifying 282 institutions confronting a double jeopardy scenario involving commercial real estate loans and the specter of losses linked to escalating interest rates.

The affected banks predominantly consist of smaller financial entities with assets totaling less than $10 billion.

Brian Graham, co-founder and partner at Klaros Group, clarified that while many of these banks aren’t insolvent or on the brink of insolvency, they are undoubtedly under pressure. This pressure, he emphasized, may result in fewer bank failures but could still have adverse effects on communities and customers.

Graham elaborated that communities may experience subtle ramifications due to banks opting out of investments in endeavors such as establishing new branches, embracing technological advancements, or expanding their workforce.

The ramifications of small bank failures are more tangential for individual depositors. As Sheila Bair, former chair of the U.S. Federal Deposit Insurance Corp., explained, there’s no immediate impact for depositors if banks fall below the insured deposit limits, which are presently set at $250,000. In the event of a bank failure insured by the FDIC, all depositors are entitled to receive compensation “up to at least $250,000 per depositor, per FDIC-insured bank, per ownership category.”