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Journal Article
Putting a name with a face: community banks count on customer service
Despite some dire predictions, community banks have not been driven out of the market by megabanks. On the contrary, their personalized services and attention to their customers? needs have allowed them to thrive.
Journal Article
Understanding the effects of the merger boom on community banks
The merger boom in the U.S. banking industry has caused the number of banking organizations in the nation to fall by nearly a third since 1990. Most of this contraction has involved small community banks. ; A common perception is that most of these small banks are being absorbed by large banks. The disappearance of small banks is raising concerns in many communities because small banks are often a major source of personal services and relationship lending to local businesses and depositors. ; Jagtiani investigates the merger boom in detail and suggests that the merger boom actually has the ...
Journal Article
Adapting to changing payments: opportunities for community bankers
As the payment system changes rapidly, community banks? flexibility and responsiveness make them well positioned to understand and meet the needs of their customers.>
Working Paper
Can feedback from the jumbo-CD market improve off-site surveillance of community banks?
We examine the value of feedback from the jumbo-certificate-of-deposit (CD) market in the off-site surveillance of community banks. Using accounting data, we construct proxies for default premiums on jumbo CDs. Then, we produce rank orderings of community banks -- defined as institutions holding less than $500 million in assets (constant 1999 dollars) -- based on these proxies. Next, we use an econometric surveillance model to generate rank orderings based on the probability of encountering financial distress. Finally, we compare these rank orderings as tools for flagging emerging problems. ...
Working Paper
Small business lending: challenges and opportunities for community banks
The recent decline in small business lending (SBL) among U.S. community banks has spurred a growing debate about the future role of small banks in providing credit to U.S. small businesses. This paper adds to that discussion in three key ways. First, this research builds on existing evidence, suggesting that the decline in SBL by community banks is a trend that began at least a decade before the financial crisis. Second, the authors show that in the years preceding the crisis, small businesses increasingly turned to mortgage credit to fund their operations. Finally, this paper illustrates how ...
Newsletter
Bringing It Home: The 14th Annual Community Bankers Symposium
The 14th annual Community Bankers Symposium, cosponsored by the Federal Reserve Bank of Chicago, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC), was held at the Federal Reserve Bank of Chicago on November 22, 2019. During a full day of speeches and panels, community bank executives, financial industry practitioners, and regulatory agency professionals who work in the Seventh Federal Reserve District explored the current landscape of community banking. This article provides an overview of the event’s key presentations and discussions.
Working Paper
Scale economies and geographic diversification as forces driving community bank mergers
Mergers of community banks across economic market areas potentially reduce both idiosyncratic and local market risk. Idiosyncratic risk may be reduced because the larger post merger bank has a larger customer base. Negative credit and liquidity shocks from individual customers would have smaller effects on the portfolio of the merged entity than on the individual community banks involved in the merger. Geographic dispersion of banking activities across economic market areas may reduce local market risk because an adverse economic development that is unique to one market area will not affect a ...
Working Paper
The demise of community banks? local economic shocks aren't to blame
A potentially troubling characteristic of the U.S. banking industry is the geographic concentration of many community banks* offices and operations. If geographic concentration of operations exposes banks to local market risk, we should observe a widespread decline in their financial performance following adverse local economic shocks. In addition, geographic diversification should help banks reduce risk significantly. By analyzing the performance of geographically concentrated U.S. community banks exposed to severe unemployment shocks in the 1990s, I find that banks are not systematically ...
Journal Article
The role of community banks in the U.S. economy
The U.S. banking system is unusual in consisting not only of some very large banks but also a large number of relatively small community banks. This bifurcated banking system in the United States has served the economy well. Over time, with regulatory change and financial innovation, large banks have become complex organizations engaged in a wide range of activities. They provide a variety of services to their customers, but often rely on hard financial information, computer models, and centralized decision-making as the basis for conducting business. In contrast, small banks have focused ...