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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.
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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.
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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.
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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.
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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.
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