WASHINGTON — Small banks are lending to small businesses much more than previously thought, according to a preview released Wednesday of an upcoming Federal Deposit Insurance Corp. survey.

After surveying more than 1,000 banks with less than $10 billion in assets and conducting one-and-one follow-up discussions with 51 institutions, the FDIC concluded that small-business lending by those institutions was actually undercounted by at least $38 billion in the fourth quarter of 2015.

"Relying on call report proxy understates small business lending by small banks," the agency said in a synopsis of its first-ever small-business lending survey. The agency plans to release the full report on the survey sometime next year.

Commercial and industrial loans of less than $1 million are typically a good proxy for calculating small-business loans made by small banks. In the fourth quarter of 2015, those C&I loans totaled $118 billion for banks with less than $10 billion in assets.

But after conducting the survey in 2016 and 2017 with the help of the Census Bureau, the FDIC found that many loans secured by one- to four-family residential properties and made by small banks are also often utilized by small businesses, which added roughly $16 billion to the total.

The FDIC data suggests small-business loan totals should be revised also because small banks said they often make loans above the normal threshold of $1 million to businesses with less than $1 million in annual revenue, which many would consider a small business. In fact, banks with assets of $1 billion to $10 billion said 20% of all their C&I loans that were greater than $1 million were to small businesses.

Using that estimate, the FDIC found that banks with $1 billion to $10 billion in assets made $21 billion in loans of more than $1 million to small businesses in the fourth quarter of 2015.

Banks with assets of less than $1 billion were not able to break out the same figures for the larger C&I loans made to small businesses. However, 86% of banks with less than $250 million in assets said that largely all of their C&I loans were made to small businesses, and 77% of banks between $250 million and $1 billion said that largely all of their C&I loans were made to small businesses.

Rather than relying on those figures, however, the FDIC used a more conservative approach by assuming that half of all C&I loans of more than $1 million made by banks with assets below $1 billion were made to small businesses in the fourth quarter of 2015. That approach added $93 million to the estimated total.

The FDIC also surveyed both small banks and large banks, and both said their top competitor is often a bank with assets of $1 billion to $10 billion.

Large banks said a bank in the $1 billion to $10 billion range in assets is a top competitor for small-business loans 74% of the time. Sixty-seven percent of large banks also said banks between $1 billion and $10 billion have a competitive advantage because they are able to offer more flexible loan terms, and 41% said those same banks can offer a more competitive interest rate.

The survey also found that small banks often think that small banks have a competitive advantage when it comes to personal attention and how quickly a decision is made on a loan.

Forty-three percent of large banks said that they have a competitive advantage in offering personal attention when making a loan. Small banks, on the other hand, said they have an even greater advantage. Fifty-eight percent of smaller institutions said they have the upper hand in providing personal attention, and 49% said they have an advantage in the speed of loan decisions.

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