Fed, CSBS Survey Examines Community Banking Activities

The Federal Reserve and the Conference of State Bank Supervisors today released an annual survey of the nation’s community banks, which provides a comprehensive overview of the key issues and challenges facing banks with less than $10 billion in assets. The survey examines lending and non-lending activities, regulatory compliance and market conditions.

Small business lending grew by more than 7 percent in 2015, with small business loans representing 17 percent of community banks’ total loan portfolios. The survey found that community banks tended to make higher-dollar loans than their larger competitors — on average, the size of a small business loan made by a community bank was $96,000, while the average loan from a larger institution was $17,000. Eighty percent of respondents said that a majority of their loans were made to existing customers, underscoring the value community banks place on building customer relationships.

Mortgage lending grew by 6 percent; however, many bankers expressed frustrations with the added compliance burden in this area, especially the TILA-RESPA integrated disclosures. Nearly two-thirds of respondents agreed that TILA, RESPA and Regulation Z together — which include TRID — were the most confusing regulations to follow, accounting for nearly a quarter of their total compliance costs. Perhaps unsurprisingly, regulatory burden was named as the top reason community banks choose to exit or curtail certain lines of business, and 5.4 percent of banks that currently offer 1-to-4 family fixed-rate mortgages said they plan to exit that line of business in the future.

Community banks are also continuing to adopt new technologies to keep up with both competition and customer demand. Eighty-one percent of banks say they are now offering mobile banking services, up from 71 percent the year prior. Bankers said that remote deposit capture and personal financial management tools were the most likely areas of expansion in the future. View the survey.

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