This analysis is based on data compiled by the three federal banking agency members of the Federal Financial Institutions Examination Council (FFIEC)—the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency—for institutions reporting under the Community Reinvestment Act (CRA) regulations.
The CRA is intended to encourage federally insured commercial banks and savings associations (savings and loan associations and savings banks) to help meet the credit needs of the local communities in which they are chartered. The regulations that implement the CRA require commercial banks and savings associations with total assets of approximately $1 billion or more to collect and report data regarding their small business and small farm lending and community development lending. The mandatory reporting threshold adjusts annually based on changes to the Consumer Price Index and for 2011 was $1.122 billion. 1
The small business and small farm lending data reported under the CRA regulations provide useful information about such lending, but they are less comprehensive than the data reported on home mortgage lending under the Home Mortgage Disclosure Act (HMDA). For example, the CRA data:
Interpreting the CRA data can be challenging. For example, lending institutions are asked to report the geographic location of the loan. If the proceeds of a small business loan are used in more than one location, the institution can record the loan location as either the address of the borrower’s business headquarters or the location where the greatest portion of the proceeds are applied, as indicated by the borrower. However, these locations may have different socio demographic and economic characteristics.
Further, although CRA data provide information on extensions of credit in a geographic area, they do not indicate the amount or nature of the overall demand for credit in that area. Consequently, caution should be used in drawing conclusions from analyses using only CRA data, as differences in loan volume across areas may reflect differences in local demand for credit. Indeed, CRA performance assessments by the supervisory agencies focus on evaluating the volume and distribution of lending in the context of local credit needs.
Finally, the CRA small business and small farm lending data reported each year cover only a portion of the credit extended to small businesses and small farms. Banks and savings associations that do not report CRA data and nonbank institutions not covered by CRA such as commercial finance companies, also extend such loans.
General Description of the 2011 CRA Small Business and Small Farm Loan Data
For 2011, a total of 859 lenders reported data about originations and purchases of small business and small farm loans, a 2.4 percent decrease from the 880 lenders reporting data for 2010 (see Table 1) 2. As a consequence of amendments to the CRA regulations, beginning in September 2005, banking institutions with assets below the mandatory reporting threshold (and, beginning in October 2004, savings associations with assets below that threshold) are not required to collect or report data on their small business or small farm lending. However, institutions with assets below the mandatory reporting threshold may voluntarily collect and report such information, and they must report the information if they elect to be evaluated as “large” institutions during CRA examinations. Of the 859 institutions reporting 2011 data, 331 institutions, or 39 percent, were not “large” institutions under the applicable regulation and therefore, reported either voluntarily or because they elected to be evaluated as “large” (see Table 3). Overall, the smaller number of reporters in 2011 than in 2010 reflects several factors including mergers and acquisitions among previous reporters, the failure of four previous reporters, and fewer voluntary reporters.
Small business and small farm lending reported by the CRA data reporters is a significant portion of total small business and small farm lending by all commercial banks and savings associations. Analysis of data from Consolidated Reports of Condition and Income (Call Reports) and Thrift Financial Reports indicates that loans by CRA reporters represent about 85 percent of the small business loans outstanding measured by number of loans and about 24 percent of the small farm loans outstanding measured by number of loans extended by all banking institutions (see Table 1). Larger institutions account for most of the reported lending: During 2011, commercial banks and savings associations with assets of $1.122 billion or more (as of December 31, 2010) originated or purchased nearly 99 percent by number of loans, and 94 percent by dollar amount of loans, of the small business loans reported under CRA (see Table 3). Lending to small farms by commercial banks and savings associations with assets of $1.122 billion or more accounted for 83 percent of the small farm loans, whether measured by number or dollar amount of loans.
In the aggregate, about 5.2 million small business loans (totaling $197 billion) and about 137,000 small farm loans (totaling $ 11.8 billion) were reported as being originated or purchased in 2011 (see Table 2. Loan originations accounted for the vast proportion of the total activity. The number of small business loans (originations and purchases combined) reported in 2011 increased about 21 percent from 2010 and the dollar amount of such lending increased about 10 percent. Some reporting institutions that were asked about their lending activity stated that small business lending opportunities had increased and in some cases reporting institutions had restarted small business credit card programs. The number of small farm loans (originations and purchases combined) was down about 7 percent and the dollar amount of such lending was virtually unchanged.
The CRA data provide information about the size of small business and small farm loans. For small business loans, the maximum loan size reported is $1 million; for small farm loans, the maximum is $500,000. Measured by number of loan originations, nearly 93 percent of the small business loans and about 75 percent of the small farm loans originated in 2011 were for amounts under $100,000 (see Table 2). Measured by dollar amount of loans, the distribution differs. About 33 percent of the small business loan dollars and about 28 percent of the small farm loan dollars were extended through loans of less than $100,000 (see Table 2).
The CRA data also include information on how many of the reported loans were extended to businesses or farms with revenues of $1 million or less. Nearly 45 percent of the number of reported small business loan originations (about 38 percent measured by dollar amount of loans) and 76 percent of the number of reported small farm loan originations (about 72 percent measured by dollar amount of loans) were extended to firms with revenues of $1 million or less (see Table 2). The CRA data also include information on how many of the reported loans were extended to businesses or farms with revenues of $1 million or less. Nearly 45 percent of the number of reported small business loan originations (about 38 percent measured by dollar amount of loans) and 76 percent of the number of reported small farm loan originations (about 72 percent measured by dollar amount of loans) were extended to firms with revenues of $1 million or less
Year-to-Year Comparison of Proportion of Small Business Loans to Smaller Firms
The proportion of small business loans extended to smaller firms in 2011 (45 percent measured by number of loans) increased about 10 percentage points or about 27 percent from 2010, although the dollar amount of these loans increased much less, only about 1.0 percentage point or about 2 percent. Lending to small firms peaked in 1999 at 60 percent, but then began to decline steadily. The 10 percent increase from 2010 to 2011 is the first notable rebound from that steady decline.
The Geographic Distribution of Small Business and Small Farm Lending
The availability of information about the geographic location of businesses and farms receiving credit provides an opportunity to examine the distribution of small business and small farm lending across areas grouped by socio-demographic and economic characteristics. Information on the distribution of businesses and population provides some context within which to view these distributions.
CRA performance assessments include an analysis of the distribution of small business and small farm loans (of all types) across census tracts grouped into four income categories: low , moderate-, middle-, and upper-income. Overall, the distribution of the number (see Table 4.1) and the dollar amounts (see Table 4.2) of small business loans across these categories largely parallels the distribution of population and businesses across these four income groups, although lending activity in upper income areas exceeds the share of businesses and population in such areas. For example, low-income census tracts include about 5 percent of the population and about 4 percent of the businesses, and received about 3 percent of the number and about 4 percent of the total dollar amount of small business loans in 2011. Upper-income census tracts include about 24 percent of the population and about 31 percent of the businesses, and received about 37 percent of the number and 34 percent of the total dollar amount of small business loans in 2011. Each income category's share of the number and dollar amount of loans remained about the same in 2011 as in 2010.
Analysis of the CRA data shows that small business loans are heavily concentrated in U.S. principal cities and suburban areas (about 88 percent measured by number or by dollar amount of all small business loans), as are the bulk of the U.S. population and the number of businesses (seeTables 4.1 and 4.2). The majority of small farm loans (about 63 percent, measured by number of loans or by dollars of loans) were extended in rural areas, with the remainder extended primarily in suburban areas (see Tables 4.3 and 4.4).
The Geographic Distribution of Small Business and Small Farm Lending
Institutions reporting CRA data disclose the number and dollar amount of their community development lending activity. Among the 859 institutions reporting for 2011, 655 institutions (about 76 percent) extended community development loans (derived from Table 5). The number of institutions reporting community development loans increased about 1 percent from 2010, when 648 institutions reported such loans. As in previous years, in 2011 lenders with assets that met or exceeded the mandatory reporting threshold ($1.122 billion in 2011) extended the vast majority of reported community development loans. When both loan originations and purchases are considered, the dollar volume of community development lending increased from 2010, from $40.3 billion (data not shown in tables) to $47 billion (see Table 5), an increase of approximately 17 percent.
Tables are in Portable Document Format (PDF).
1. The mandatory reporting threshold increased from $1.098 billion in 2010 to $1.122 billion in 2011.
2. For the years 2001 through 2007, the following lender asset-size categories were used in Tables 1, 3, and 5 (in millions): less than 100; 100-249; 250-999; and 1,000 or more. To improve users’ ability to differentiate between large banking institution reporters and voluntary reporters, in Tables 1, 3, and 5 the lender asset-size categories for the 2008 CRA data were adjusted as follows (in millions): less than 100; 100-249; 250-1,060; and 1,061 or more. For the year 2009, the lender asset-size categories have been adjusted as follows in Tables 1, 3, and 5 (in millions): less than 100; 100-249; 250-1,108; and 1,109 or more. For 2010, the categories were less than 100; 100-249; 250-1,097 and 1,098 or more. For 2011, the categories are less than 100; 100-249; 250-1,121; and 1,122 or more. Table 1 data reflect the former asset categories for 2001 through 2007 and the adjusted asset categories for 2008-2011.
3.For purposes of the regulations, a low-income census tract has a median family income that is less than 50 percent of the median family income for the broader area (the metropolitan area containing the tract or the entire non-metropolitan area of the state); a moderate-income census tract, 50 percent to less than 80 percent; a middle-income census tract, 80 percent to less than 120 percent; and an upper-income census tract, 120 percent or more. Data regarding census tract income categories are derived from the 2000 Census of Population and Housing.
4. Beginning in 1998, institutions filing CRA data were allowed to report that the census tract location of a firm or farm receiving a loan was unknown. For 2011, 2 percent of the reported small business loans by number and 0.6 percent by dollar amount included such a designation.
5. Data on the share of population across census tract income categories are derived from the 2000 Census of Population and Housing. Data on the share of businesses across census tract income categories are derived from information from Dun and Bradstreet files of businesses. Calculations exclude agricultural-related firms.