Community Banks Are Vital to Small Business Lending

Jessica SarterSmall Business Lending

Community Bank

Community BankThe FDIC’s Quarterly Banking Profile for the 3rd quarter 2013 and the attached update to the 2012 FDIC Community Banking Study reports several interesting trends. The number of FDIC insured banks fell to its lowest level in years (6,891), a decline of 59% between 1984 and 2011. The decline occurred resulting primarily from the disappearance of the smallest banks (assets less than $100 million), caused by consolidations, mergers, failures and the lack of new charters being issued.

At the end of 2012 community banks, which accounted for 95% of the total number of U.S. banking institutions and only 14% of the industry’s assets still accounted for 46% of the small loans to businesses and farms in the U.S.
In 2012, the net interest income of community banks accounted for 78% of their net operating income as compared to 61% for non-community banks. Low interest rates continued to have an adverse effect on net interest income.

The opportunity for increased non-interest earnings exists through participation in government lending programs such as the SBA 7a guaranteed loan programs where the premiums earned on the sale of the government guaranteed portion of these loans remain near record levels.