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A lack of communication allowed a number of banks to use funds from the small-business lending program to pay dividends or exit Tarp, Christy Romero wrote in a report issued Tuesday.
April 9 -
Interest in SBA lending has picked up as the agency works to attract more lenders and borrowers by streamlining its programs.
March 26 -
Small banks have long seemed best able to cultivate small-business customers because they could offer a more personal touch, and now big banks are increasingly trying to replicate their success.
November 26 -
Data published this month provides support for criticism of the small business lending program as a backdoor exit from Tarp for small banks. Institutions that used SBLF capital to refinance bailout infusions increased such loans at far lower rates than peers.
January 24
Consolidation makes it hard for small banks to hold onto share in any market. In small-business lending, its that much harder when credit card debt issued mostly by big banks is the only reliable source of volume.
Among banks with more than $10 billion of assets, growth in business loans with original principal balances of $100,000 or less (excluding those backed by real estate) lost momentum during the recession. But credit extended through such loans generally representing borrowing on small-business credit cards has been roughly steady in a range of $84 billion to $88 billion since the third quarter of 2010. (The following graphic shows market share for small business loans by bank asset-size category and other data on small business loans. Interactive controls are described in the captions. Text continues below.)
Meanwhile, at banks with less than $10 billion of assets, small business loans defined by balance size generally continued to decline through the fourth quarter in the categories reported to regulators. The same holds true for an overlapping group of banks with less than $2 billion in assets.
For banks with less than $10 billion of assets, loans in the $250,000 to $1 million category have fallen 18% from a peak in mid-2008 to $206 billion at yearend 2012, while loans in the $100,000 to $250,000 range have fallen 26% from a peak in mid-2007 to $61 billion. (Banks reported small business loan data once annually, for the second quarter, through 2009, and quarterly beginning in 2010.)
Banks with more than $10 billion of assets similarly experienced declines in these two loan-size categories since peaks before and during the recession. But their share of each loan-size category is higher now than it was early last decade, reflecting mergers that have concentrated loans and assets, generally at the biggest banks.
A far more pronounced shift has occurred as a result of the growth of large credit-card issuing operations. The share of business loans with balances of less than $100,000 extended by banks with more than $10 billion of assets has grown 28 percentage points from mid-2002 to 66% at the end of 2012.
Small banks have traditionally been viewed as having expertise in making credit decisions on small, local borrowers, and, to be sure, smaller banks devote more of their balance sheets to such borrowers. About 21% of total loans at banks with less than $2 billion of assets were small business loans in the fourth quarter, and 17% at banks with less than $10 billion of assets, compared with just 5% at banks with more than $10 billion of assets.
Giants like Bank of America (BAC), JPMorgan Chase (JPM) and Wells Fargo (WFC) have been bulking up in the sector, however,
