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Relationships Matter: Small Business and Bank Branch Locations

The National Community Reinvestment Coalition (NCRC) analyzed the relationship between large banks that make small business loans and the number of branches those banks operate in each county in the United States.

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We found that the number of bank branches belonging to large banks and the gross domestic product (GDP) of a county are the two most important factors in the amount of small business lending in that county. Each year, a single branch location generated small business lending of nearly $3.03 million in metro areas, $2.3 million in smaller cities and $1.9 million in rural areas after accounting for other economic factors in our models. We also observed that between 2012 and 2018 the small business lending market has been increasingly dominated by the largest lending institutions. While bank branches across the country have continued their decline from peak levels in 2009, branch closures are less likely in communities where large banks make small business loans. Unfortunately, the lack of data from small and intermediate banks with asset sizes up to around $1.25 billion makes it difficult to assess the extent of their small business lending. This makes it critically important to implement marketwide small business loan transparency requirements under Section 1071 of the Dodd-Frank Act. We know that the number of small banks in operation declined dramatically during the study period, likely reducing an important source of small business lending. This may mean that among banks that make small business loans the market is going to be dominated by larger banks, with consequences for smaller businesses that may find building a relationship with large banks difficult.


  • Since 2009, the number of banks in operation declined by 22% and the number of branches that serve the public fell by 14%.
  • Most of the banks that closed were smaller and intermediate sized banks, with assets under about $1.25 billion.
  • Business lending by large banks in urban areas is concentrated in counties where they have a branch, with an average $2.5 million in business lending per year per branch.
  • The most important predictors of the amount of small business lending by large banks in metropolitan areas are the number of branch locations and county level GDP.
  • In addition to the number of bank branches and GDP, the level of population and low levels of unemployment are also important predictors in micropolitan and rural areas.
  • The number of bank branches continued to decline. Our prior studies have tracked this trend since 2009.
  • The number of institutions declined unevenly across different assets sizes. The ranks of banks with largest assets size have grown, while small and intermediate size banks plummeted. In 2012, there were only 19 banks with assets of $100 billion or more, increasing to 30 by 2018. Meanwhile, small bank branches declined from 5,018 to 3,443 by 2018.
  • While the amount of small business lending by banks with branch locations in a county was steady, an increasing portion of lending comes from outside banks and from business credit card lenders with their combined share rising from 25% in 2012 to 37% by 2018.
  • Lending in low- to moderate-income (LMI) neighborhoods of metropolitan counties appears robust, however, lending to LMI areas in rural counties is only 10% that of lending in middle- to upper-income (MUI)  areas. This could indicate a  problem in loan access for rural business development.

Smaller banks (with assets under about $1.25 billion) are exempt from reporting on their lending under CRA. This makes it all but impossible to calculate the impact of the loss of these institutions on small businesses. There are indications that the steady decline in the number of smaller institutions and their branch locations are hindering financial access and disrupting relationship lending.