This analysis is based on data compiled by the three Federal banking agency members of the Federal Financial Institutions Examination Council (FFIEC) with Community Reinvestment Act (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 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 implemented the CRA during 2019 required commercial banks and savings associations with total assets of approximately $1.28 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 2019 was $1.284 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. 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 socioeconomic characteristics.
Further, although the 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 the CRA, such as commercial finance companies, also extend such loans.
For 2019, a total of 695 lenders reported data about originations and purchases of small loans (loans with original amounts of $1 million or less) to businesses and farms, representing a 0.7 percent decrease from the 700 lenders reporting data for 2018 (see Table 1) 1. Of the 695 institutions reporting 2019 data, 126 had assets below the mandatory reporting threshold and reported either voluntarily or because they elected to be evaluated as a “large” institution during CRA examinations.2. Overall, the smaller number of total reporters in 2019 compared with 2018 reflects fewer voluntary reporters, as the number of institutions with assets above the reporting threshold increased by 8 (1.4 percent) between 2018 and 2019.
Small business and small farm lending reported in the CRA data covers a significant share of small business and small farm lending by all commercial banks and savings associations. Analysis of data from Consolidated Reports of Condition and Income indicates that CRA reporters account for about 74.4 percent of small business loans outstanding (by dollars) and about 31.3 percent of small farm loans outstanding (by dollars) at bank and thrift institutions (see Table 1). Larger institutions account for most of the reported lending. During 2019, banks and thrifts with assets of $1.284 billion or more (as of December 31, 2018) accounted for 98 percent (by dollars) of reported small business loan originations (see Table 3). The very largest institutions – 118 reporters with assets of $10 billion or more – accounted for about 73 percent of CRA reported small business loans originated in 2019 (by dollars, not shown in tables).
In the aggregate, about 7.6 million small business loans (originations and purchases) totaling nearly $265 billion were reported in 2019 (see Table 1). The total number of loans increased by 7.9 percent, while the number of loans originated increased by 7.7 percent relative to 2018. The large year-over-year increase in reported originations of small business loans is mostly attributable to a small handful of banks. The dollar amount of originations increased by about 3.6 percent. Regarding small farm loans, the number of originations increased by about 2.4 percent and the dollar amount increased by 0.4 percent in 2019 from 2018.
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, about 94 percent of the small business loans and 80 percent of the small farm loans originated in 2019 were for amounts under $100,000 (see Table 2). The distribution differs for the dollar amount of loans originated; about 39 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).
The CRA data include information about loans to businesses or farms with revenues of $1 million or less. Overall, about 49 percent of the number of reported small business loan originations (about 35 percent measured by dollar amount of loans) and 59 percent of the number of reported small farm loan originations (about 69 percent measured by dollar amount of loans) were extended to firms with revenues of $1 million or less (see Table 2).
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. 3. 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. 4. . For example, low-income census tracts include about 7 and 6 percent of the population and businesses respectively, and accounted for about 5 percent of the number and 6 percent of the total dollar amount of small business loans in 2019. 5. Upper-income census tracts include about 28 percent of the population and about 32 percent of the businesses, and had about 39 percent of the number and 37 percent of the total dollar amount of small business loans in 2019. The share of reported loans by dollar amount going to upper income tracts has been similar in previous years (see Table 1).
Analysis of the CRA data shows that small business loans are heavily concentrated in cities and their suburban outliers, 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 were extended to farms located in rural areas (see Tables 4.3 and 4.4).
Institutions reporting CRA data disclose the number and dollar amount of their community development loans. Among the 695 institutions reporting for 2019, 619 institutions reported community development lending activity (see Table 5). As in previous years, in 2019 lenders with assets that met or exceeded the mandatory reporting threshold ($1.284 billion in 2019) extended the vast majority of reported community development loans. Overall, all lenders reported over $111 billion in community development loans in 2019, an 8% increase from the amount reported in 2018.
Tables are in Portable Document Format (PDF).
1 For the purposes of this table, reporters with assets of less than $250 million are categorized as ‘small’; reporters with assets at or above the CRA reporting asset threshold for the given year (see http://www.ffiec.gov/cra/reporter.htm) are categorized as ‘large’; and the remainder of reporting institutions are categorized as ‘medium’. 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. In addition, depository institutions must report the information if they elect to be evaluated as “large” institutions during CRA examinations.
2 Tables 3 and 5 indicate that 126 reporting institutions had assets as of December 31, 2018 below $1.284 billion. The asset size threshold that triggers data collection and reporting is $1.284 billion as of December 31 of each of the two prior calendar years.
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 2015 American Community Survey. For more information refer to http://www.census.gov/acs/.
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 2019, about 1 percent of the reported small business loans by both number and dollar amount included such a designation.
5 Data on the share of population across census tract income categories are derived from the 2015 American Community Survey. 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.