The Evolution of U.S. Community Banks and its Impact on Small Business Lending

2014 ◽  
Author(s):  
Julapa Jagtiani ◽  
Ian Kotliar ◽  
Ramain Quinn Maingi
Keyword(s):  
Small Business ◽  
Community Banks ◽  
Small Business Lending

Small-business lending will suffer under US bank rules

2015 ◽  
Keyword(s):  
Financial Crisis ◽  
Small Business ◽  
Primary Target ◽  
Community Banks ◽  
Small Business Lending ◽  
Wall Street ◽  
Compliance Costs ◽  
Content Type ◽  
Job Growth ◽  
Regional Banks

Significance Community and regional banks were never the primary target of post-financial crisis reforms, but have been affected by the knock-on effects of the 2010 Dodd-Frank Wall Street Reform and Competitiveness Act. Impacts Regulation has an outsize impact on institutions that have a smaller base over which to amortise regulatory and compliance costs. This has major consequences for lending patterns, as smaller community banks are still a significant source of small loans to businesses. Regulatory relief for smaller institutions could free up resources for small business lending, which might stimulate job growth.

scholarly journals Impact of Bank Closings on Credit Extension to Businesses in Low-Income and Minority Neighborhoods

2019 ◽  
Vol 47 (1) ◽  
pp. 20-49
Author(s):  
Maude Toussaint-Comeau ◽  
Yi David Wang ◽  
Robin Newberger
Keyword(s):  
Small Business ◽  
Low Income ◽  
Small Businesses ◽  
Bank Failures ◽  
Small Community ◽  
Community Banks ◽  
Small Business Lending ◽  
Local Areas ◽  
New Research ◽  
The Impact

New research is surfacing since the last financial crisis, not only to help predict risks associated with bank failures but also to assess the impact of bank failures on the economy and local geographies. However, although bank failures occurred mostly among small (community) banks, much less is understood regarding how the closing of mission-oriented community banks, or minority-owned banks, affect traditionally underserved markets, areas such failed banks were designed to serve. We conduct an empirical investigation testing the effects of bank closings on local areas. We find that, as a result of bank closings, there are significant frictions with small businesses obtaining credit, which appear to be potent enough to cause cumulative declines in aggregate small business lending in neighborhoods, lasting up to 3 years. We also find evidence that such lending shocks have repercussions on small business growth. We find that the closing of large banks also has an impact on small business lending, consistent with previous research, which has shown that as small businesses lose credit from large banks, they are not able to switch easily to other banks, leading to a decline in aggregate lending in local areas. We find this to be true for low- or moderate-income (LMI) and minority businesses/neighborhoods. We also find that the failure of community development financial institutions (CDFIs) and minority depository institutions (MDIs) leaves a credit void that may not automatically be filled in LMI and minority neighborhoods.

The Impact of Federal Home Loan Bank (FHLB) Advances on Small Business Lending by Community Banks—2010–2016

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Elijah Brewer ◽  
William E. Jackson ◽  
Thomas S. Mondschean
Keyword(s):  
Small Business ◽  
Community Banks ◽  
Small Business Lending ◽  
Regulatory Burden ◽  
Business Loan ◽  
Core Deposits ◽  
Federal Home Loan Banks ◽  
Loan Growth ◽  
The Impact ◽  
The Relationship

Abstract In this paper, we examine the relationship between small business loan growth and growth in core deposits and Federal Home Loan Banks (FHLBs) advances from 2010 to 2016. Controlling for other effects, we find that the relationships between small business loan growth is positively and significantly related to both FHLB advance growth and core deposit growth, with the coefficient on advance growth being significantly larger than the coefficient on core deposits over the entire sample period. We also tested whether this relationship changed after 2014:3 reflecting the Federal Reserve’s relaxation of the regulatory burden on smaller banks. We find that the relationship between loan growth and core deposit growth became more positive after the change, but the relationship between loan growth and FHLB advance growth did not. As a result, we could no longer reject the hypothesis that the coefficient on core deposit growth was equal to the coefficient on FHLB advance growth after 2014:3. This provides some empirical support that the regulatory changes in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (DFA) influenced small business lending by strengthening the impact of the growth in core deposits on the growth of small business lending, complementing the work of Bordo and Duca (2018) that changes in DFA had some unintended negative consequences for lending to small businesses. It also suggests that lowering the regulatory burden faced by community banks (which have a larger proportion of core deposits to total assets than non-community banks) could improve the incentive to increase small business lending. It also implies that FHLB advances remain an important funding tool at the margin to give commercial banking organizations greater liquidity and flexibility in funding their balance sheets.

Stress Tests and Small Business Lending

2018 ◽  
Author(s):  
Kristle Romero Cortts ◽  
Yuliya S. Demyanyk ◽  
Lei Li ◽  
Elena Loutskina ◽  
Philip E. Strahan
Keyword(s):  
Small Business ◽  
Stress Tests ◽  
Small Business Lending

scholarly journals Effects of Regional Bank Merger on Small Business Borrowing: Evidence from Japan

2015 ◽  
Vol 7 (11) ◽  
pp. 62
Author(s):  
Hironobu Miyazaki ◽  
Hiroyuki Aman
Keyword(s):  
Small Business ◽  
Small Businesses ◽  
Economies Of Scale ◽  
Loan Portfolio ◽  
Small Business Lending ◽  
Borrowing Costs ◽  
Bank Merger ◽  
Regional Bank ◽  
Small Business Loans ◽  
The Impact

This study examines the impact of a regional bank merger in Japan on borrowing by small businesses, focusing on firms that borrow from the acquiring bank, the acquired bank, or both. First, we find that post-merger borrowing costs declined. This result suggests that small borrowers enjoy more favorable post-merger financing conditions because efficiencies from economies of scale lead to lower costs. Second, we<strong> </strong>find that post-merger borrowing costs decline for firms that borrow only from the acquiring or acquired bank, whereas they did not decline for firms that borrow from both. Third, we find that only small business loans to firms that borrow from both the acquiring and acquired banks decrease post-merger. This result suggests that small business lending might decline because of a merged bank’s loan portfolio and lending strategy.

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