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Last Updated: May 16, 2022

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Volume 14 Number 4	The Importance of Community Banks in Paycheck Protection Program Lending - PDF During the current public health emergency, community banks are playing a vital role in supporting small businesses through the Small Business Administration’s Paycheck Protection Program (PPP). Community banks throughout the country participated in the program, with community bank PPP loan portfolios representing over 30 percent of total bank PPP loans.
Volume 14 Number 1	2019 Summary of Deposits Highlights - PDF In the 2019 Summary of Deposits (SOD) Survey, the banking industry reported an increase in deposits and a decrease in the number of branch offices, continuing recent trends. This article describes deposit gathering and office closures shown in the 2019 SOD, which reports data as of June 30, 2019. For selected topics, comparative information about credit unions is included. This article also examines characteristics of the offices of operating banks that close versus those that are sold or leased, and of offices that close versus those that remain open following bank acquisitions.
Volume 13 Number 4	Bank and Nonbank Lending Over the Past 70 Years - PDF Total lending in the U.S. has grown dramatically in the past 70 years and since the 1970s, the share of bank loans has generally fallen as nonbanks gained market share in residential mortgage and corporate lending. In other business lines, shifts in loan holdings from banks to nonbanks have been less pronounced as banks and nonbanks continue to play important roles in lending for commercial real estate, agricultural loans, and consumer credit. Studying the roles that banks and nonbanks play in lending markets allows for a better understanding of how banks respond to growth in nonbank lending and the implications of associated risks for the banking sector and the broader economy.
Volume 13 Number 4	Leveraged Lending and Corporate Borrowing: Increased Reliance on Capital Markets, With Important Bank Links - PDF Over the past decade, U.S. nonfinancial corporate debt reached record highs as issuance of corporate bonds and leveraged loans grew rapidly while credit quality and lender protections deteriorated. Much of this growth in corporate borrowing came through capital markets, though important connections to the banking system remain. This article examines this shift in corporate borrowing to capital markets over the past several decades. It also details the ways corporate debt has grown, the resulting risks this shift poses to banks since the 2008 financial crisis, and what factors could mitigate those risks.
Volume 13 Number 4	Trends in Mortgage Origination and Servicing: Nonbanks in the Post-Crisis Period - PDF The mortgage market changed notably after the collapse of the U.S. housing market in 2007 and the financial crisis that followed. A substantive share of mortgage origination and servicing, and some of the risk associated with these activities, migrated outside of the banking system. Some risk remains with banks or could be transmitted to banks through other channels, including bank lending to nonbank mortgage lenders and servicers. Changing mortgage market dynamics and new risks and uncertainties warrant investigation of potential implications for systemic risk.
Volume 13 Number 1	Merger Adjusting Bank Data: A Primer Analysis of banking trends often focuses on specific industry subgroups. The analyst tracks the performance or characteristics of an industry subgroup over time, and the results, if compelling, can serve as input to policy decisions. An important component of analyzing industry subgroups is a procedure called merger adjustment. This article describes how and when FDIC analysts use merger adjustment when analyzing the banking industry. It discusses when to merger adjust and when not to merger adjust, and offers guidance for interpreting the results.
Volume 12 Number 4	Deposit Growth Slows and Office Decline Continues The 2018 Summary of Deposits Survey showed that FDIC-insured institutions reported an increase in deposits and a decrease in offices over the past year. During the year ended June 2018, deposits increased at both noncommunity banks and at community banks, but at slower rates than in recent years. The decrease in the number of offices is a decade-long trend in both community banks and noncommunity banks, although the office opening and closing patterns of these two types of institutions has differed markedly. This article will describe these trends in detail and will look at the association between office closures and changes in bank profitability and efficiency. Analysis of Call Report data indicates that banks that closed offices at higher rates between 2013 and 2018 reported improved efficiency ratios and stronger profitability.
Volume 11 Number 4	Factors Shaping Recent Trends in Banking Office Structure for Community and Noncommunity Banks Total industry deposits grew once again in 2017, and the rate of deposit growth was higher at community banks than at noncommunity banks, according to the 2017 Summary of Deposits (SOD) survey.
Volume 11 Number 4	Community Bank Mergers Since the Financial Crisis: How Acquired Community Banks Compared With Their Peers An increase in mergers and a dearth of new charters in the post-crisis period have renewed the interest of researchers in banking industry consolidation.
Volume 11 Number 1	Banks Attract More Deposits While Operating Fewer Offices Deposits across the banking industry grew while the number of offices shrank among noncommunity banks and increased among community banks from the previous year, according to the 2016 Summary of Deposits survey. Meanwhile, offices in energy-dependent counties reported almost no deposit growth as natural gas, oil, and coal prices fell.
Volume 10 Number 4	Core Profitability of Community Banks, 1985–2015 The relatively low profitability reported by community banks since the 2008 financial crisis has sparked concerns about the core profitability of the community banking model. This paper constructs an econometric model using 31 years of data to estimate the impact of macroeconomic shocks on industry average pretax return on assets (ROA). After accounting for macroeconomic factors, the remaining unexplained variation is considered to be the core component of profitability. Core ROA is found to have been relatively stable between 1985 and 2015. It trended downward over the 1990s, but the effect of the financial crisis on industry composition has led to a reversal and a modest increase in core profitability. More than 80 percent of the post-crisis decline in profitability can be explained by negative macroeconomic shocks.
Volume 10 Number 4	Mutual Institutions: Owned by the Communities They Serve Mutual institutions—savings banks and savings and loans owned by their depositors—are a unique type of community bank. This paper provides an overview of mutual institutions and their place in the U.S. financial system. They generally earn lower returns on assets than stock community banks, but have higher-quality assets. Mutuals also failed less often between 2008 and 2014 than did stock community banks. From their 19th-century origins as providers of small-denomination savings accounts and the means of pooling funds to finance homeownership, to their dominance of U.S. mortgage finance for much of the 20th century, and to their strong performance during the recent financial crisis, mutuals remain an important segment of the community banking sector.
Volume 9 Number 4	Financial Performance and Management Structure of Small, Closely Held Banks Closely held banks may face operational challenges in raising external capital and recruiting future managers, especially in rural areas. At the same time, closely held banks may have certain operational advantages, including the ability to focus on long-term goals and to minimize principal-agent problems that may arise from the separation of ownership and operational control. This paper compares the performance of closely and widely held banks as identified in a survey of FDIC bank examiners and finds that closely held banks do not appear, on net, to be underperforming widely held banks in recent years. Closely held banks where the day-to-day manager is a member of the ownership group seem to outperform banks with a hired manager. The survey of bank examiners in three FDIC supervisory Regions was used to identify the ownership and management structure of more than 1,350 community banks. The survey results suggest that almost 75 percent of community banks in these Regions can be regarded as closely held, typically on the basis of family or community ties.
Volume 9 Number 1	Brick-and-Mortar Banking Remains Prevalent in an Increasingly Virtual World This paper chronicles long-term trends in the number and density of U.S. banking offices from 1935 to 2014. The study examines the effects that population trends, bank crises, changes in banking laws, and online and mobile banking have had on the number and density of banking offices, and explores the relationship between technology and brick-and-mortar bank offices.
Volume 8 Number 2	Community Banks Remain Resilient Amid Industry Consolidation
Volume 8 Number 2	Long-Term Trends in Rural Depopulation and Their Implications for Community Banks
Volume 7 Number 4	Community Bank Developments in 2012
Volume 7 Number 1	Highlights From the 2012 Summary of Deposits

Economies of Scale in Community Banks Staff Study 2020-06 Using financial and supervisory data from the past 20 years, we show that scale economies in community banks with less than $10 billion in assets emerged during the run-up to the 2008 financial crisis due to declines in interest expenses and provisions for losses on loans and leases at larger banks. The financial crisis temporarily interrupted this trend and costs increased industry-wide, but a generally more cost-efficient industry re-emerged, returning in recent years to pre-crisis trends. We estimate that from 2000 to 2019, the cost-minimizing size of a bank’s loan portfolio rose from approximately $350 million to $3.3 billion. Though descriptive, our results suggest efficiency gains accrue early as a bank grows from $10 million in loans to $3.3 billion, with 90 percent of the potential efficiency gains occurring by $300 million.
The Importance of Community Banks in Paycheck Protection Program Lending FDIC Quarterly Volume 14 Number 4 During the current public health emergency, community banks are playing a vital role in supporting small businesses through the Small Business Administration’s Paycheck Protection Program (PPP). Community banks throughout the country participated in the program, with community bank PPP loan portfolios representing over 30 percent of total bank PPP loans.
Shared Destinies? Small Banks and Small Business Consolidation FDIC Center for Financial Research Working Paper No. 2020-04 The industrial and banking sectors have each seen consolidation over the past fifteen years, with small institutions representing an ever-shrinking share. Existing literature argues that small banks' comparative advantages lie in small-business nance. We argue that some of the consolidation in the banking sector is a consequence of changes to the industrial organization of the real economy. We use a Bartik instrument and variation in exposure to industries with different patterns of small-business growth to show that the real-side demand for small business nance is partially responsible for the relative decline in the deposits, income, and loan growth at small banks. We do not nd that small-business growth impacts large banks nor do we nd that large-business growth affects small banks. The results are predominantly driven by the propensity of small banks to be acquired.
Measurement of Small Business Lending Using Call Reports: Further Insights From the Small Business Lending Survey Staff Studies Report No. 2020-04 Aggregate U.S. bank lending to small businesses is often approximated with regulatory data based on loan size using commercial and industrial (C&I) loans of $1 million or less as a proxy. We assess the validity of this proxy in measuring small business lending using data from the Federal Deposit Insurance Corporation’s (FDIC’s) Small Business Lending Survey (SBLS), a nationally representative survey of banks. We find that more than 30 percent of C&I lending by banks with $1 billion to $10 billion in assets is in small loans (less than $1 million) to large firms or larger loans to small firms, which contradicts the core assumption of high correlation between loan size and firm size that underpins usage of the proxy. When we relax the proxy’s assumption for loan size using parameters generated from the survey data, we find that aggregate small business lending by banks likely recovered from the 2007–2009 recession (Great Recession) two to four years earlier than indicated by the proxy. Using $10 million in gross annual revenue as a maximum small business size, we find that the proxy on net understates small business lending by banks with $1 billion to $10 billion in assets by up to 23 percentage points, with wide dispersion among banks in the degree of over- and understatement. This dispersion undermines the proxy’s ability to correctly rank banks by the proportion of their C&I loan portfolio devoted to small business lending. We also find that the proxy likely only mildly understates small business lending for the smallest banks, those with less than $1 billion in assets.
Analyzing the Community Bank Leverage Ratio Staff Studies Report No. 2020-03 This note analyzes the newly introduced Community Bank Leverage Ratio (“CBLR”) framework. The analysis covers the framework’s eligibility, its capital stringency, and its potential impact on systemwide capital levels under a hypothetical adverse scenario.
2019 Summary of Deposits Highlights FDIC Quarterly Volume 14 Number 1 In the 2019 Summary of Deposits (SOD) Survey, the banking industry reported an increase in deposits and a decrease in the number of branch offices, continuing recent trends. This article describes deposit gathering and office closures shown in the 2019 SOD, which reports data as of June 30, 2019. For selected topics, comparative information about credit unions is included. This article also examines characteristics of the offices of operating banks that close versus those that are sold or leased, and of offices that close versus those that remain open following bank acquisitions.
June 2019	Minority Depository Institutions: Structure, Performance, and Social Impact This study updates the FDIC’s 2014 minority depository institution (MDI) research study and explores changes in FDIC-insured MDIs, their role in the financial services industry, and their impact on the communities they serve. The study period covers 2001 to 2018 and looks at the demographics, structural change, geography, financial performance, and social impact of MDIs. The study found that MDIs continue to consolidate, but the surviving MDIs are performing significantly better than they were five years ago. It also found that MDIs are effectively serving their communities.
2018	Small Business Lending Survey The Small Business Lending Survey is a nationally-representative survey of U.S. banks and their small business lending practices. The report of survey findings offers new information for both small and large banks on many aspects of their small business lending. The results provide context for the implications of current bank consolidation trends on U.S. small businesses.