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Journal Article
Resilience of Community Banks in the Time of COVID-19
Stress tests in December 2020 showed that the largest U.S. banks had strong capital levels and could continue to lend to households and businesses under hypothetical severe recessions. Assessing thousands of small community banks against similar criteria suggests that, while about one-fifth could fall below adequate capitalization, only a handful of those risk becoming insolvent. Overall, this is a reassuring view for small banks and their communities, suggesting that the risk of widespread bank failures leading to financial instability appears to be small.
Journal Article
The Changing Composition of Bank Branches in Seventh Federal Reserve District States
Across the United States, the banking office landscape has shifted substantially since the financial crisis in 2008, reflecting both long-standing trends of small bank closures, as well as more recent patterns of bank branch declines. These trends are playing out in the states of the Seventh District as well, where the number of banking offices has declined in each state, and increasingly, community banks are losing their share of branches in certain markets. Low- and moderate-income (LMI) neighborhoods in a few of the District?s most populous counties are nearly devoid of community banks.
Speech
Comments on tailored regulation and forward guidance (with reference to Dr. Seuss, Strother Martin in Cool Hand Luke and other serious economists)
The Federal Reserve knows what community and regional banks do for their communities. We appreciate that you are the backbone for the homeowners, small businesses, service clubs and school sports teams and scouts and churches and myriad other activities that make for better communities. We want you not only to endure, but to succeed and grow.
Bankers Cite Economy, Cybersecurity as Top Risks
In the CSBS 2022 National Survey of Community Banks, the economy and cybersecurity were ranked as top risks for community bankers.
Journal Article
Minority-Owned Banks and Their Primary Local Market Areas
In this article, we analyze the experience and performance of MDIs in their primary local service areas in recent periods, including before, during, and after the 2008 financial crisis. We provide a review of the sector, highlighting key policies and initiatives pertaining to and affecting these institutions, and provide a brief review of previous research. We document trends in the sector, including: 1) the characteristics of the locations where MDIs tend to do business; 2) the changing landscape of MDIs in terms of openings, closings, and mergers by ethnic ownership; and 3) the performance ...
Newsletter
Community Banking: A Time of Promise and Challenge
The 13th annual Community Bankers Symposium, cosponsored by the Federal Reserve Bank of Chicago, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC), was held at the Federal Reserve Bank of Chicago on November 16, 2018. During a full day of speeches and panels, a group of 160 community bank executives, financial industry practitioners, and regulatory agency professionals who work in the Seventh Federal Reserve District1 explored the evolving landscape of community banking.2 This article provides an overview of the event?s key presentations ...
Journal Article
How Small Banks Deal with Large Shocks
After a natural disaster such as a hurricane, tornado, or flood, banks in the affected area experience a sharp rise in the demand for loans as property owners look to repair the damage. Recent research has focused on such events to study how small community banks adjust their typical way of doing business to respond to large shocks. The research finds that banks strategically adjust their business in three ways to meet the increased demand for capital. Two adjustments increase the funds available for lending, while one shifts lending from areas unaffected by the disaster to the affected area, ...
Working Paper
The evolution of u.s. Community banks and its impact on small business lending
There have been increasing concerns about the declining number of community banks and that the acquisitions of community banks by larger banks might result in significant reductions in small business lending (SBL) and disrupt relationship lending. This paper examines the roles and characteristics of U.S. community banks in the past decade, covering the recent economic boom and downturn. We analyze risk characteristics (including the confidential ratings assigned by bank regulators) of acquired community banks, compare pre- and post-acquisition performance and stock market reactions to these ...
Working Paper
Community Bank Performance: How Important are Managers?
Community banks have long played an important role in the U.S. economy, providing loans and other financial services to households and small businesses within their local markets. In recent years, technological and legal developments, as well as changes in the business strategies of larger banks and non-bank financial service providers, have purportedly made it more difficult for community banks to attract and retain customers, and hence to survive. Indeed, the number of community banks and the shares of bank branches, deposits, banking assets, and small business loans held by community banks ...
Fed Launches Second Tool to Help Community Banks Meet Accounting Standard
The Expected Losses Estimator (ELE) is a spreadsheet-based tool to help community banks calculate allowances for credit losses under the CECL standard.