Large banks grab headlines with big pledges to small business, but community banks are the ones making hefty commitments compared to their size.

When measuring small-business loans to assets, community banks easily come out on top. At most large and regional banks, such loans make up a minuscule percentage of total assets.

Small-business lending "is a rounding error" at big banks, says Bruce Lammers, chairman and chief executive of Ridgestone Bank in Brookfield, Wis. "For us, it's a livelihood."

During the U.S. Small Business Administration's last fiscal year, Ridgestone's originations under the SBA's 7(a) program equaled 44% of the bank's $396 million in assets.

Other small banks have steered a higher percentage assets to the 7(a) program. The $369 million-asset Live Oak Bancshares approved $463 million of SBA 7(a) loans in the last fiscal year. (The Wilmington, N.C., company sells many of its small-business loans.)

At least four other banks devoted more than half of their assets to 7(a) loans: First Colorado National Bank in Paonia, Colo.; Noah Bank in Elkins Park, Pa.; NewBank in Flushing, N.Y.; and RepublicBankAz in Phoenix.

At the biggest banks, loans to small businesses are a tiny fraction of assets. For instance, 7(a) loans represented less than 0.01% of total assets at Bank of America and Citigroup.

Small banks hold 10% of the banking industry's assets but are responsible for more than a third of all small-business loans, according to the Independent Community Bankers of America.

"Community banks will make loans to small business that megabanks won't make," says John Hand, the ICBA's vice president of congressional relations. A small business "may get turned down two or three times by a megabank" before getting approval from a community bank.

It's easier for community banks to understand a small-business owner's concerns since those lenders double as small businesses, Lammers says.

"If we think a borrower is paying too much to acquire another business, we will talk to them about it," Lammers says. "They would just get a flat-out 'no' from a big bank."

In all fairness, big banks lend billions of dollars to small business each year.

Bank of America's lending to small businesses rose 28% last year compared to 2011, to $8.7 billion, says spokesman Don Vecchiarello. B of A "does more total small-business loans than the 3,000 smallest banks combined," he says.

Loans backed by SBA guarantees are a small part of Bank of America's overall portfolio of small-business loans, Vecchiarello says. "The SBA is an important partner … but looking only at SBA lending really doesn't tell the whole story," he says.

Citi loaned $9.6 billion to small businesses last year, says spokesman Andrew Brent. "While Citi takes advantage of federal SBA programs … we don't stop there," Brent adds. "We work aggressively to support small businesses in as many ways as possible."

The SBA did not respond to requests for comment.

Small banks have long emphasized the importance of analyzing a lender's ability to make loans to small businesses. When Congress last year was debating whether to increase business lending at credit unions, Cam Fine, the ICBA's president and CEO, noted that the biggest credit unions were barely making any small-business loans. He noted that such loans made up less that 0.5% of the loan portfolio at the $50 billion-asset Navy Federal Credit Union.

Ridgestone could significantly ramp up small-business lending if it had the same resources as B of A, Lammers says. "I've got two branches and maybe 12 lenders," he says. "If I [had B of A's] staffing, I could really go to town."

Community banks may be hurt by a perception that they lack the resources to handle the borrowing needs of small businesses, says Rohit Arora, CEO of Biz2Credit, which pairs borrowers and lenders. "Smaller banks don't have the branch network or the brand name," he says.

SBA loans are also difficult to administer, which can make them challenging for small banks, Arora says. "The underwriting for SBA loans and the level of analysis is rigorous," he says.

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