A conference hosted by the Federal Reserve System and the Conference of State Bank Supervisors (CSBS) recently convened to discuss the latest trends and business opportunities in community banking.
The conference, called Community Banking in the 21st Century, brought together regulators from 29 states, academics, community bankers and federal and state lawmakers to discuss three main focal points including the reliance of the community bank business model, the relationship between overall bank size and performance, and regulatory issues.
According to a national survey of more than 550 community banks, community banks maintain a close, critical relationship with small businesses. In total, community banks lent approximately $275 billion to small businesses over the course of 2015, a higher amount than larger banks have extended over that period of time.
Conference research data also showed that community banks were less likely to fail, be acquired or absorbed into parent holding companies between 1997 and 2012. Further, data showed that community banks were major economic drivers for local communities through lending, liquidity and philanthropic activities.
When analyzing the relationship between community bank size and performance, data showed that among publicly traded companies, there were incentives for banks to grow larger to exploit economies of scale. Typically, larger banks will spend less on regulatory burdens and have improved credit risk monitoring. Moreover, data showed that large community banks could improve their overall performance by increasing the ratio of small business loans to assets.