Small banks have long been the source of a disproportionate amount of credit for small businesses, but, as with other loan categories, consolidation eroded their position by concentrating lending into larger institutions.
But with assets at big banks treading water in the 12 months through June, the smallest banks regained a sliver of market share.
During the period, assets held by banks with balance sheets of $2 billion or less increased 1.4% to about $2 trillion, while assets across the industry were mostly steady at $13.3 trillion, leaving the small bank group with 14.7% of the total, according to data from the Federal Deposit Insurance Corp.
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Small-business loans — or those with original balances of less than $1 million — outside the farm sector held by small banks actually fell 2.1% to $287.5 billion during the same time. But such loans fell a bit faster across the industry — 2.3% to $695.2 billion — giving the small bank group a 41.4% share, up a 10th of a percentage point from the prior year. (Banks report small-business loan data once a year, for the period that ends June 30.)
That marked a reversal of a long-standing trend. The small bank group's share of small-business loans had fallen each year since at least June 30, 2003, for a cumulative loss of 7.6 percentage points through mid-2008. The small bank group's share of assets fell by 4.8 percentage points to 14.6% during the same time.
Pulling back the lens to banks with assets of $10 billion or less, the story is much the same. From mid-2003 to mid-2008, these banks' share of industrywide small-business loans fell by 6.9 percentage points to 54.7%, while their share of industrywide assets fell 7.8 percentage points to 22.5%.
However, while assets held by banks with balance sheets of $10 billion or less increased 1.2% in the 12 months through June to about $3 trillion, their small-business loans declined 3.4% during the same time to $376 billion. That reduced the group's share of industrywide small-business loans another 0.6 percentage points to 54.1%.
