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Remarks by FDIC Chairman Martin J. Gruenberg
To the FDIC Community Banking Conference
“Strategies for Long-Term Success”
Arlington, VA
April 6, 2016
Introduction
Good morning and welcome to today’s FDIC Community Banking Conference.
The FDIC is the lead federal supervisor for the majority of community banks in the United
States, and the future of community banking has long been a major priority for us.
In 2012, the FDIC released its Community Banking Study1. This was the first systematic review
of the community bank experience in the United States over the past 30 years.
In the study, we introduced a new research definition of community banks that was not based
solely on asset size, but on the business model – relationship lending funded by stable core
deposits focused on a local geographic area that the bank understands well.
At that time we also held a conference to assess the impact of the financial crisis on community
banks. It seems to us, four years later, with the crisis largely behind us, to be an appropriate time
to hold a conference to focus on the future of community banks.
The conference today will consider four key issues for community banks: the business model;
supervision; the challenges and opportunities posed by information technology; and the
significance of ownership structure and succession planning.
I would like to begin this conference by making two points.
First – you have heard me say this before, but I think it bears repeating -- community banks play
a critically important role in the financial system and economy of the United States.
As FDIC research has documented, community banks today account for about 13 percent of the
banking assets in the United States. They also account for about 44 percent of all the small loans
to businesses and farms made by all banks in the United States. Even that may understate the
importance of community banks because most of the small business lending done by large banks
is credit card lending. When it comes to a lender actually having first-hand knowledge about the
small business seeking a loan, that lender is going to be a community bank.
The FDIC also found that for more than 20 percent of the 3,100 counties in the United States, the
only banks operating in those counties are community banks. That means that for thousands of
rural communities, small towns, and urban neighborhoods, the only physically present banking
institution is a community bank.
1 “FDIC, “FDIC Community Banking Study,” December 2012, https://fdic.gov/regulations/resources/cbi/study.html.
Remarks by FDIC Chairman Martin J. Gruenberg
To the FDIC Community Banking Conference
“Strategies for Long-Term Success”
Arlington, VA
April 6, 2016
Introduction
Good morning and welcome to today’s FDIC Community Banking Conference.
The FDIC is the lead federal supervisor for the majority of community banks in the United
States, and the future of community banking has long been a major priority for us.
In 2012, the FDIC released its Community Banking Study1. This was the first systematic review
of the community bank experience in the United States over the past 30 years.
In the study, we introduced a new research definition of community banks that was not based
solely on asset size, but on the business model – relationship lending funded by stable core
deposits focused on a local geographic area that the bank understands well.
At that time we also held a conference to assess the impact of the financial crisis on community
banks. It seems to us, four years later, with the crisis largely behind us, to be an appropriate time
to hold a conference to focus on the future of community banks.
The conference today will consider four key issues for community banks: the business model;
supervision; the challenges and opportunities posed by information technology; and the
significance of ownership structure and succession planning.
I would like to begin this conference by making two points.
First – you have heard me say this before, but I think it bears repeating -- community banks play
a critically important role in the financial system and economy of the United States.
As FDIC research has documented, community banks today account for about 13 percent of the
banking assets in the United States. They also account for about 44 percent of all the small loans
to businesses and farms made by all banks in the United States. Even that may understate the
importance of community banks because most of the small business lending done by large banks
is credit card lending. When it comes to a lender actually having first-hand knowledge about the
small business seeking a loan, that lender is going to be a community bank.
The FDIC also found that for more than 20 percent of the 3,100 counties in the United States, the
only banks operating in those counties are community banks. That means that for thousands of
rural communities, small towns, and urban neighborhoods, the only physically present banking
institution is a community bank.
1 “FDIC, “FDIC Community Banking Study,” December 2012, https://fdic.gov/regulations/resources/cbi/study.html.
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The bottom line is that community banks matter in terms of access to basic banking services and
credit for consumers, farms, and small businesses across the United States.
Second, for all the challenges community banks face – and we will be discussing a number of
them during the course of this conference – community banks have emerged from the worst
financial crisis since the Depression and most severe recession since World War II with
substantial strength.
As the FDIC has documented in our Quarterly Banking Profile, community banks have been
outpacing the industry as a whole in terms of both earnings growth and loan growth across a
range of asset categories, including residential mortgages, commercial and industrial loans, and
loans secured by commercial real estate2.
In short, the community bank business model has proven itself to be resilient and adaptable even
under a challenging set of economic conditions.
It is important that the narrative about community banks be balanced and positive. The narrative
should recognize the critical importance and substantial strengths of community banks in the
United States while acknowledging the challenges going forward.
I would like to use the remainder of my time this morning to do three things: First, share our
research results showing the resilience of the community banking sector after 30 years of
industry consolidation. Second, discuss the solid performance of community banks in what has
been a relatively challenging post-crisis economic environment. And finally, outline the
priorities for the FDIC in regard to our supervision of community banks that may be responsive
to some of the challenges that lie ahead.
Historical Perspective on Banking Industry Consolidation
It is fair to say that banking industry consolidation is not a post-crisis development; it is a long-
term process that began 30 years ago.
During that time, the total number of federally-insured bank and thrift charters has declined by
nearly two-thirds, from more than 18,000 in 1985 to just under 6,200 at the end of last year.
Almost a quarter of this net consolidation can be attributed to the more than 2,700 institutions
that have failed since 1985. Most of those failures occurred during the thrift crisis of the late
1980s and early 1990s, and then the recent crisis beginning in 2008.
Even more important has been the voluntary consolidation of charters that has taken place across
or within banking organizations.
Annual rates of voluntary consolidation peaked in the mid- to late-1990s as a result of changes in
state and federal laws that permitted intrastate and interstate branching. As states repealed unit
banking laws prohibiting branching within state borders, and the Congress passed legislation
2 FDIC, Quarterly Banking Profile, https://www.fdic.gov/bank/analytical/qbp/.
The bottom line is that community banks matter in terms of access to basic banking services and
credit for consumers, farms, and small businesses across the United States.
Second, for all the challenges community banks face – and we will be discussing a number of
them during the course of this conference – community banks have emerged from the worst
financial crisis since the Depression and most severe recession since World War II with
substantial strength.
As the FDIC has documented in our Quarterly Banking Profile, community banks have been
outpacing the industry as a whole in terms of both earnings growth and loan growth across a
range of asset categories, including residential mortgages, commercial and industrial loans, and
loans secured by commercial real estate2.
In short, the community bank business model has proven itself to be resilient and adaptable even
under a challenging set of economic conditions.
It is important that the narrative about community banks be balanced and positive. The narrative
should recognize the critical importance and substantial strengths of community banks in the
United States while acknowledging the challenges going forward.
I would like to use the remainder of my time this morning to do three things: First, share our
research results showing the resilience of the community banking sector after 30 years of
industry consolidation. Second, discuss the solid performance of community banks in what has
been a relatively challenging post-crisis economic environment. And finally, outline the
priorities for the FDIC in regard to our supervision of community banks that may be responsive
to some of the challenges that lie ahead.
Historical Perspective on Banking Industry Consolidation
It is fair to say that banking industry consolidation is not a post-crisis development; it is a long-
term process that began 30 years ago.
During that time, the total number of federally-insured bank and thrift charters has declined by
nearly two-thirds, from more than 18,000 in 1985 to just under 6,200 at the end of last year.
Almost a quarter of this net consolidation can be attributed to the more than 2,700 institutions
that have failed since 1985. Most of those failures occurred during the thrift crisis of the late
1980s and early 1990s, and then the recent crisis beginning in 2008.
Even more important has been the voluntary consolidation of charters that has taken place across
or within banking organizations.
Annual rates of voluntary consolidation peaked in the mid- to late-1990s as a result of changes in
state and federal laws that permitted intrastate and interstate branching. As states repealed unit
banking laws prohibiting branching within state borders, and the Congress passed legislation
2 FDIC, Quarterly Banking Profile, https://www.fdic.gov/bank/analytical/qbp/.