Tables are in Portable Document Format (PDF).
The following analysis of nationwide summary statistics is based on data compiled by the Federal Financial Institutions Examination Council (FFIEC) for institutions reporting under Community Reinvestment Act (CRA) regulations.
The CRA is intended to encourage federally insured commercial banks and savings associations to help meet the credit needs of the local communities in which they are chartered. The CRA regulations require larger commercial banks and savings associations to report data on their small business, small farm, and community development lending. The institutions subject to these requirements generally include independent institutions with total assets of $250 million or more and institutions of any size if owned by a holding company that has assets of $1 billion or more. Analysis of Call Report and Thrift Financial Report data on small business and small farm loans outstanding indicates that lenders reporting under the CRA account for about three quarters of the small business loans and one-quarter of the small farm loans extended by all commercial banks and savings associations. The small business and small farm lending data, when coupled with information reported about the geographic locations that constitute each reporting institution's local CRA assessment area(s), make it possible to better evaluate the performance of reporting institutions under the CRA lending test.1
The small business and small farm lending data reported under the CRA regulations are more limited than the data reported on home mortgage lending under the Home Mortgage Disclosure Act (HMDA). In particular, the CRA data include information only on loans originated or purchased, not on applications that are turned down or withdrawn by the applicant. Unlike HMDA data, the CRA data do not include information about applicant income, sex, or racial or ethnic background, although the CRA data do indicate whether a loan is extended to a borrower with annual revenues of $1 million or less. Finally, the CRA data are not reported application-by-application, as HMDA data are, but rather are aggregated into three loan size categories and then reported at the census tract level.
CRA data furnish a valuable tool for many different types of analyses. At the same time, the analysis of CRA data poses challenges--for example, while CRA data provide information on extensions of credit in an area, they do not indicate the amount or nature of the overall demand for credit there. Thus, caution should be used in drawing conclusions from analyses using only CRA data, as differences in local loan volume may reflect differences in local demand, among other things.
General Description of the 1999 CRA Data
As shown in table 1, 1,911 lenders reported data on small business and small farm lending in 1999, including 1,450 commercial banks and 461 savings associations. Most of the reporting institutions (73 percent) had assets under $1 billion, including 20 percent that had assets under $250 million (derived from table 3). (As indicated above, independent institutions with assets under $250 million, generally are not required to report these data.) Compared with 1998, the number of reporters has changed very little. The number of lenders extending community development loans also changed very little, from 385 in 1998 to 404 in 1999 (table 5).
A total of 3,287,974 small business loans, totaling $175 billion, and 220,587 small farm loans, totaling $12 billion, were reported for 1999. The level of lending activity for 1999 is higher than the level reported for 1998, with increases in both the number (20 percent) and dollar amount (8 percent) of reported small business loans. Similarly, the level of small farm lending increased from 1998 to 1999, by approximately 7 percent measured both by number and dollar amount. Reported loans include both originations during 1999 and purchases of loans during the year. A well-developed secondary market for small business loans does not exist, and the CRA data reflect this.2 Most reported small business and small farm loans were originations; less than 4 percent of the loans of either type were reported as purchases from another institution (derived from table 2).
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. In 1999, the average small business loan was for about $53,100, and the average small farm loan was for about $55,800 (derived from table 2). Measured by number of loans, 89 percent of the small business loans and 85 percent of the small farm loans were for amounts under $100,000 (table 2). Measured by dollars, the distribution differs: only 29 percent of the small business loans and 40 percent of the small farm loans fell in the under-$100,000 loan size category.
The CRA data include information on how many of the reported loans were extended to borrowers with gross annual revenues of $1 million or less. Such borrowers fall within generally accepted definitions of a small business, although many somewhat larger firms also are often categorized as being a small business or small farm. In 1999, 60 percent of the reported small business loans and 91 percent of the small farm loans (measured by number of loans) were extended to firms with revenues of $1 million or less. For small business loans, this proportion has increased from 55 percent reported in 1998. The data show that, on average, loans to firms with revenues under $1 million are smaller than loans to larger firms. For example, the average small business loan to these small firms is about $42,800, while the average loan amount to larger businesses is roughly $68,600 (derived from table 2).
The vast majority of the reported loans (about 98 percent measured by number of loans) was either originated or purchased by commercial banks (data not shown). This preponderance of commercial banks in small business lending is consistent with data provided by other sources, including the Federal Reserve's 1987 and 1993 National Surveys of Small Business Finances, which show that commercial banks are the predominant source of credit for small businesses.3
Larger commercial banks and savings associations (those with assets of $1 billion or more) originated or purchased about 82 percent of the reported small business loans (table 3). These larger banks and savings associations represent a minority of the number of institutions reporting such loans. No significant differences between commercial banks and savings associations were observed in this regard, as larger institutions did the majority of small business lending within their institutional categories. The overall pattern differs for small farm loans, where larger institutions accounted for only about half of the loans. These patterns are little changed from previous years.
In 1999, a total of 25,824 community development loans were made, totaling $17.1 billion, representing an increase from 1998 of 19 percent by number of loans, and 6 percent by dollar amount (table 5). A community development loan is a loan that otherwise has not been collected or reported, and generally has as its primary purpose affordable housing for low- or moderate-income individuals, community services targeted to these individuals, activities that promote economic development by financing small businesses or small farms, or activities that revitalize or stabilize low- or moderate-income neighborhoods.
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 their socio-demographic and economic characteristics. Because the CRA data do not include the lending of all commercial banks and savings associations, the data do not fully represent all small business and small farm lending by these types of institutions. Nonetheless, reporting institutions account for a significant portion of small business lending.
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 neighborhood income categories: low-, moderate-, middle-, and upper-income.4 Overall, the distribution of the number and the dollar amounts of small business loans across these categories parallels the distribution of population and businesses across these four income groups (tables 4.1 and 4.2). For example, low-income areas include about 4.9 percent of the population and 5.6 percent of the businesses, and received 3.6 percent of the number and 5.0 percent of the total dollar amount of newly originated small business loans.5
The volume of small business lending activity increased from 1998 to 1999, including such lending in low- and moderate-income areas. However, in 1999, the proportion of small business lending in low- and moderate-income areas, compared with the proportion of such lending in middle- and upper-income areas, declined. When measured by dollars, the proportion of small business lending in low- and moderate-income areas declined by 2 percent from 1998. When measured by number of loans, the proportion of such lending declined by 8 percent from 1998 to 1999.
When comparing the distribution of small business lending across central city, suburban, and rural areas, small business loans are heavily concentrated in U.S. central city and suburban areas, as are the bulk of the U.S. population and the number of businesses. In lower-income areas, most small business loans (about 90 percent) occur in central city census tracts; in higher-income areas, small business loans are most frequently made in suburban areas. This income-urbanization pattern is not generally observed for small farm loans, however. Most small farm loans are made in rural areas regardless of income.
Community Development Lending
In addition to information about small business and small farm lending, institutions covered by the CRA data reporting requirements also disclose the number and dollar amount of their community development loans. For 1999, 25,824 community development loans totaling $17.1 billion were reported (table 5). Both the number of loans and the dollar amount for 1999 reflect increases from the activity reported in 1998 (19 percent by number of loans, and 6 percent by dollar amount, respectively). A total of 404 institutions reported community development loans. Lenders with assets greater than $250 million extended the bulk of community development loans, when measured both in the number of loans and dollar terms. A community development loan is not otherwise reported under CRA as a small business, small farm, or home mortgage loan (except for multifamily dwelling loans reported under HMDA).
1. The regulations that implement the CRA provide three performance tests for large retail institutions: a lending test, an investment test, and a service test.
2. The one exception is for small business loans guaranteed by the Small Business Administration. See "Report to the Congress on Markets for Small Business and Commercial Mortgage Related Securities," the Board of Governors of the Federal Reserve System and the U.S. Securities and Exchange Commission (September 1996).
3. See Rebel A. Cole, John D. Wolken, and R. Louise Woodburn, "Bank and Nonbank Competition for Small Business Credit: Evidence from the 1987 and 1993 National Surveys of Small Business Finances," Federal Reserve Bulletin, vol. 82, no. 11 (November 1996), pp. 983-995.
4. For purposes of the regulations, a low-income census tract has a median family income that is less than 50 percent of the broader area (either Metropolitan Statistical Area (MSA) or nonmetropolitan portion of a state) median family income; a moderate income tract, 50 percent to less than 80 percent; a middle income tract, 80 percent to less than 120 percent; and an upper income tract, 120 percent or more.
5. Data on the share of businesses across neighborhood income categories is derived from information provided by the Office of the Comptroller of the Currency and pertains to the distribution of businesses in 1997 (the most current information available).