Gov. Andrew Cuomo announced today that community banks provide more than half of all small business loans and nearly all small farm loans in the state, helping to increase job growth and the state’s economy, Gannett’s Haley Viccaro reports.
A state Department of Financial Services report showed that community banks have 22 percent of all Federal Deposit Insurance Corporation assets but provide almost 55 percent of small business loans and 90 percent of small farm loans.
“Community banks represent a strong economic engine that drives growth in New York and their performance is remarkable,” Cuomo said in a statement. “Small business is the engine of job growth and most small business loans come not from the big national banks, but from community banks.”
Community banks increased their small business loan lending from 43 percent to 55 percent between 2001 and 2011, the report said. In 2001 the banks had $116.3 billion in aggregate deposits and grew in 2011 to $130.4 billion.
Banks with assets below $1 billion account for about 28 percent of all small business loans and 43 percent of small farm loans statewide.
Despite the financial crisis, community banks continued to offer loans to small businesses and homeowners. Larger national banks chose to pull back from providing loans during the crisis.
“Community banks focus on the unique needs of their communities,” said Benjamin Lawsky, superintendent of Financial Services, in a statement. “They build stronger customer relationships which help attract local retail deposits.”
Community banks in Albany, Buffalo, Rochester and Syracuse service small manufacturing and technology businesses and start-up companies, which draws businesses and programs to the upstate metropolitan area.
After a sharp decline in the 1990s due to mergers with larger banks, community banks grew in the 2000s and have 38 percent of all loan assets in the state. Commercial and residential real estate lending probably led to the increase in banks, the Department of Financial Services said.
Although they are solidly growing, community banks may have to find new ways to reduce costs to overcome future challenges, Lawsky said. Interest rates and the development of new bank technologies is expected to increase, which could negatively affect small community banks.
Michael Smith, CEO of the New York Bankers Association, said changing requirements under the international Basel III presents a threat to community banks and Lawsky has urged that the banks be exempt from some Basel III regulations.
Community banks are banks that have less than $10 billion in assets. In 2011, there were a reported 169 community banks in New York compared to about 299 in the late 1990s.