This analysis is based on data compiled by the three Federal banking agency members of the Federal Financial Institutions Examination Council (FFIEC) with CRA responsibilities —the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency. This analysis was conducted using data compiled for institutions reporting under the Community Reinvestment Act (CRA) regulations.

Background

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 2012 was $1.160 billion.

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:

• include information on loans originated or purchased, but not on applications denied;
• indicate whether a loan is extended to a borrower with annual revenues of $1 million or less, but the data do not include demographic information about the applicant; and
• are aggregated into three categories based on loan size and reported at the census tract level, rather than loan-by-loan.

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 2012 CRA Small Business and Small Farm Loan Data

For 2012, a total of 830 lenders reported data about originations and purchases of small business and small farm loans, a 3.4 percent decrease from the 859 lenders reporting data for 2011 (see Table 1) 1. 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 830 institutions reporting 2012 data, more than 300 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 2012 than in 2011 reflects mergers and acquisitions among 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) indicates that loans by CRA reporters represent about 87 percent of the small business loans outstanding measured by number of loans and about 38 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 2012, commercial banks and savings associations with assets of $1.160 billion or more (as of December 31, 2011) 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 $1.160 billion or more accounted for 88 percent of the small farm loans measured by number of loans and 84 percent measured by dollar amount of loans.

In the aggregate, about 5.9 million small business loans (totaling $206 billion) and about 177,000 small farm loans (totaling $ 12.6 billion) were reported as being originated or purchased in 2012 (see Table 2). In most years, loan purchases are only a small share of the reported activity (under 5 percent measured by number of loans), but in 2012 one lender reported the purchase of a large portfolio of credit card-related loans. Largely because of this activity, loan purchases accounted for nearly 14 percent of the reported small business lending activity in 2012. The number of small business loan originations reported in 2012 increased about 2 percent from 2011 and the dollar amount of such originations was up 3 percent. Contact with reporting institutions indicates that most of the reporting institutions experiencing a significant increase in their small business lending cited an increase in credit-card related activities.

The number of small farm loan originations was up nearly 30 percent from 2011 and the dollar amount of such lending was up about 7 percent. Most of the increase in small farm lending from 2011 reflects an adjustment in lending reported by one lender that previously had reported some loans in the under $100,000 category as small business loans but in 2012 reported them as small farm loans.

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 80 percent of the small farm loans originated in 2012 were for amounts under $100,000 (see Table 2). Measured by dollar amount of loans, the distribution differs; about 31 percent of the small business loan dollars and about 29 percent of the small farm loan dollars were extended through loans of less than $100,000 (see Table 2).

Loans to Smaller Businesses and Farms

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. Overall, 44 percent of the number of reported small business loan originations (about 37 percent measured by dollar amount of loans) and 58 percent of the number of reported small farm loan originations (about 67 percent measured by dollar amount of loans) were extended to firms with revenues of $1 million or less (see Table 2).

The proportion of small business loans extended to smaller firms in 2012 measured by number of loans was down a few percentage points from 2011; measured by dollar amount ) extensions were little changed from 2011. Lending to small firms peaked in 1999 at 60 percent, but then began to decline steadily primarily due to a substantial increase in lending to larger firms through lines of credit and credit cards.

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 relative income categories: low-, moderate-, middle-, and upper-income.2 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.3 For example, low-income census tracts include about 6 percent of the population and about 6 percent of the businesses, and received nearly 5 percent of the number and about 6 percent of the total dollar amount of small business loans in 2012. 4 Upper-income census tracts include about 28 percent of the population and about 31 percent of the businesses, and received about 37 percent of the number and 35 percent of the total dollar amount of small business loans in 2012. Each income category's share of the number and dollar amount of loans remained about the same in 2012 as in 2011.

Analysis of the CRA data shows that small business loans are heavily concentrated in U.S. Metropolitan Statistical Areas (MSA) (about 87 percent measured by number and 88 percent measured by dollar amount of all small business loans), as are the bulk of the U.S. population and the number of businesses (see Tables 4.1 and 4.2). The majority of small farm loans (about 64 percent, measured by number of loans or by dollars of loans) were extended to farms located outside of MSAs (see Tables 4.3 and 4.4).

Community Development Lending

Institutions reporting CRA data disclose the number and dollar amount of their community development lending activity. Among the 830 institutions reporting for 2012, 666 institutions (about 80 percent) provided information about their community development loans (derived from Table 5). The number of institutions reporting community development loans increased about 2 percent from 2011, when 655 institutions reported such loans. As in previous years, in 2012 lenders with assets that met or exceeded the mandatory reporting threshold ($1.160 billion in 2012) 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 2011, from $47 billion (data not shown in tables) to $54.8 billion (see Table 5), an increase of approximately 17 percent.

Tables are in Portable Document Format (PDF).

---

Endnotes

NOTE: Statistical tables prepared by the FFIEC for this press release of the 2012 CRA data differ from those in previous years because they do not include a breakout of lending activity in principal cities. The Office of Management and Budget revised the list of Metropolitan Statistical Areas (MSAs) and principal cities in February 2013 but detailed identification about the geographies that comprise the principal cities were not available in time for the production of these tables. Instead, the tables disclose the data in two broad categories, lending within MSAs or metropolitan divisions and lending outside of MSAs. For a list of MSAs and principal cities see http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b13-01.pdf.

1. 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 are 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. For 2012, the categories are less than 100, 101-249, 250-1,159 and 1,160 or more. Table 1 data reflect the former asset categories for 2001 through 2007 and the adjusted asset categories for 2008-2012.

2. 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 2010 American Community Survey. For more information refer to http://www.census.gov/acs/www.

3.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 2012, 4 percent of the reported small business loans by number and 1.5 percent by dollar amount included such a designation.

4. Data on the share of population across census tract income categories are derived from the 2010 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.