National and Regional Trends in Community Banking

27 Pages Posted: 10 Sep 2014 Last revised: 2 May 2015

See all articles by M. Kabir Hassan

M. Kabir Hassan

University of New Orleans - College of Business Administration - Department of Economics and Finance

Will Hippler

University of La Verne

Date Written: March 31, 2015


Community banking plays an important role in financial intermediation in the United States, especially in the context of providing financing in smaller, rural markets and for small businesses. However, recent trends in regulation, the economic environment, and industry practices have led to a significant decline in the amount of FDIC-chartered institutions that qualify as community banks. In addition, the share of community-bank-held assets in the United States is declining as well. The decline of the community banking industry has significant implications for the efficiency and growth of the real economy, as larger banks may not be able to serve the community banking demographic as efficiently. In this study, we develop a dataset that allows us to analyze banking data collected from all FDIC-charted institutions and published by the FDIC. We use this data to analyze the community banking industry at the national, regional, state, and local levels. We are able to report the trends, strengths, and weakness of the community banking industry for the past twenty years. In addition, we develop two sets of community banking indexes meant to assess the relative and nominal changes in the strength of the community banking industry. One set of indicators simply measure market share, while others are composite community banking indexes that represent a unique contribution to the analysis of the industry. Finally, we analyze developments in the community banking industry across the tenures of the past three FDIC Chairs, which can provide context and guidance with respect to the perspective of key regulatory officials on community banking issues. Analysis of the data shows that the community banking industry is declining in the United States. However, the regional and local community banking industries, while still declining, have been relatively less affected. Our Community Banking Relative Growth Index (CRGI) shows that community banks have been weakening, relative to non-community banks, but the degree of weakening has been less at the local level. Our Community Bank Momentum Index (CMOM) shows that, on a nominal basis, the community banking industry has experienced nominal growth and that the regional and local banks are driving this trend.

Keywords: Community Banking, Regulation, Growth, Relative Growth Index, Momentum Index

JEL Classification: G21, G28

Suggested Citation

Hassan, M. Kabir and Hippler, William, National and Regional Trends in Community Banking (March 31, 2015). Available at SSRN: or

M. Kabir Hassan (Contact Author)

University of New Orleans - College of Business Administration - Department of Economics and Finance ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

William Hippler

University of La Verne ( email )

1950 Third Street
La Verne, CA 91750
United States

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