Community Banking in the 21st Century
The fourth annual Federal Reserve System/ Conference of State Bank Supervisors Community Banking in the 21st Century Research and Policy Conference took place September 28-29 at the Federal Reserve Bank of St. Louis. The research conference brought together community bankers, academics, policymakers, and bank regulators to discuss the latest research on community banking.
The Federal Reserve/CSBS research conference presents an innovative approach to the study of community banks. Academics explore issues raised by the industry in a neutral, empirical manner and present their findings at the conference. Community bankers contribute through participation on discussion panels and feedback to the research presented, by contributing to an annual national survey, and by serving as keynote speakers at the conference.
Federal Reserve Governor Jay Powell gave opening remarks at the fourth annual conference. Other guest speakers will included CSBS President and CEO John Ryan and Federal Reserve Bank of St. Louis President James Bullard.
The call for papers for the conference opened Feb 2, 2015.
For more information, please contact firstname.lastname@example.org.
Gateway Auditorium, 6th Floor | Federal Reserve Bank of St. Louis
September 28-29, 2016
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- Wednesday, September 28
Research Paper Session 1
The Continuing Relevance and Importance of the Community Bank Business ModelCommunity Bank Discussant: William Dana, Jr.
President and CEO, Central Bank of Kansas CityIs the Traditional Banking Model a Survivor?Vincenzo Chiorazzo, Vincenzo D'Apice, Pierluigi Morelli, Italian Banking Association; and Robert DeYoung,University of KansasBank Business Models in the US: Identification, Performance, Risks and Regulation
Rym Ayadi, HEC MontrealWhy Banks Matter: Measuring the Impact of Banks on Missouri's EconomyJoseph H. Haslag, University of MissouriThe Changing Face of Communities Served by Minority Depository Institutions: 2001 - 2014 (PDF)Russell D. Kashian, Fernanda Contreras and Claudia Perez-Valdez, University of Wisconsin – WhitewaterReaction to the Continuing Relevance and Importance of the Community Bank Business Model Session- Robin A. Prager and William Dana Jr.The Continuing Relevance and Importance of the Community Bank Business Model - Moderated Question and Answer Session
Networking and Lunch
Research Paper Session 2Moderator: Cynthia Course
Director, Financial Insitution Supervision and Credit, Federal Reserve Bank of San FranciscoCommunity Bank Discussant: Allan Landon
General Partner, Community BanCapital, Portland Ore.Is Bigger Necessarily Better in Community Banking?Joseph P. Hughes, Julapa Jagtiani, and Loretta J. Mester Rutgers University; Federal Reserve Bank of Philadelphia; Federal Reserve Bank of ClevelandBank Size, Compliance Costs and Compliance Performance in Community BankingDrew Dahl, Andrew Meyer and Michelle Neely Federal Reserve Bank of St. LouisHas the Relationship Between Bank Size and Profitability Changed?Kristen Regehr and Rajdeep Sengupta, Federal Reserve Bank of Kansas CityReaction to the Relationship Between Community Bank Size and Performance Session- Cynthia Course and Allan (Al) LandonThe Relationship Between Community Bank Size and Performance - Moderated Question and Answer Session
- Thursday, September 29
Research Paper Session 3Moderator: Todd Vermilyea
Senior Associate Director and Economist, Board of Governors of the Federal Reserve SystemCommunity Bank Discussant: Glen Jammaron
, Alpine Banks of Colorado, Glenwood Springs, Colo.Did Capital Requirements in the Early 20th Century U.S. Promote Bank Stability? (PDF)Michael Gou, University of California at IrvineDodd-Frank's Federal Deposit Insurance ReformKyle D. Allen, Louisiana Tech University; Travis R. Davidson, Ohio University; Scott E. Hein, Texas Tech University; and Matthew D. Whitledge, Coastal Carolina UniversityCommercial Lending Concentration and Bank Expertise: Evidence from Borrower Financial StatementsPhilip G. Berger and Michael Minnis, University of Chicago; and Andrew Sutherland, Massachusetts Institute of TechnologyReaction to the Community Bank Regulatory Issues Session Todd Vermilyea and Glen JammaronCommunity Bank Regulatory Issues- Moderated Question and Answer Session
Networking and Lunch
Panel Discussion: Community Banking in the 21st Century: 2016 National Survey of Community Banks and State RoundtablesPanelistsLori Bettinger
Executive Vice President, Alliance Partners; President, BancAlliance , Alliance Partners/ BancAllianceRichard Sanborn
President and Chief Executive Officer , Seacoast Commerce Bank, San Diego, CalifDiscussion Topic 1
How do you see regulatory burden impacting the community banking industry in the short term? Long term? (Sanborn / Williams)Discussion Topic 2
Looking ahead 10 years, what aspects of the community bank business model will undergo the most dramatic change? Which will likely remain unchanged? (Bettinger / Mehlum)Moderated Question and Answer Session
Research Papers, Authors and Key Findings
Research Paper Session 1
The Continuing Relevance and Importance of the Community Bank Business Model
Key Findings: Banks with business models normally associated with community banking—that is, those that emphasize relationship loans, core deposit funding, revenue streams from traditional banking products and physical branches--were less likely than other banks to fail, be acquired or absorbed into parent holding companies, 1997 to 2012. The survival advantage was accentuated during the financial crisis.
Bank Business Models in the US: Identification, Performance, Risks and Regulation
Rym Ayadi, HEC Montreal
Author: Joseph Haslag, University of Missouri
Key Findings: A hypothetical withdrawal of Missouri banks from commercial and agricultural lending would cause job losses reducing employment by five percent and result in (discounted) output losses over the next 25 year equal to two-thirds of Missouri's current GDP.
Key Findings: Black-owned banks declined in number, 2000 to 2014, while banks owned by Asian Americans, Native Americans and Hispanics increased. Black-owned banks became increasing isolated in highly segregated communities where poverty is prevalent
Reaction to the Continuing Relevance and Importance of the Community Bank Business Model Session- Robin A. Prager and William Dana Jr.
The Continuing Relevance and Importance of the Community Bank Business Model - Moderated Question and Answer Session
Research Paper Session 2
Key Findings: The paper examines the overall economies of scale among publicly traded banks, as of 2013, and finds that large banks (assets more than $10 billion) are more efficient than large community banks and large community banks are more efficient than small community banks in terms of their abilities to achieve high market values for assets. The authors also find that large community banks, but not small community banks or large banks, enhance their performance (become more efficient) by originating more small business loans.
Key Findings: Economies of scale in satisfying regulatory requirements were evident in a sample of 469 community banks surveyed in 2015. Higher (lower) compliance expenses, moreover, did not necessarily lead to better (worse) regulatory ratings.
Key Findings: Profitability increased with size for community and regional banks, but at a decreasing rate, 2001 to 2014. Regulatory changes imposed in the aftermath of the financial crisis, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, did not significantly alter earlier relationships between size and profitability, suggesting that community banks have not been "disadvantaged relative to their larger competitors."
Reaction to the Relationship Between Community Bank Size and Performance Session- Cynthia Course and Allan (Al) Landon
The Relationship Between Community Bank Size and Performance - Moderated Question and Answer Session
Research Paper Session 3
Author: Michael Gou, University of California at Irvine
Key Findings: Banks subject to higher capital requirements in 1905 did not experience less leverage or lower subsequent rates of failure. This suggests that capital requirements were ineffective in promoting bank stability.
Authors: Kyle Allen, Louisiana Tech University; Travis Davidson, Ohio University; Scott Hein, Rawls College of Business, Texas Tech University; Journal of Financial Research; Matthew Whitledge, Coastal Carolina University
Key Findings: The Dodd-Frank Wall Street Reform and Consumer Protection Act shifted the basis on which deposit insurance fees are assessed from deposits to all liabilities, while, at the same time, lowered assessment rates. Because community banks rely disproportionally on deposits to fund assets, they benefited from these changes: In the first year of the new assessment mechanism, in 2011, they paid about $744 million less than they would have under the prior system.
Key Findings: Banks were less likely to collect audited financial statements from firms operating in industries in which they (the banks) had greater numbers of borrowers, 2002 to 2011, which is consistent with a hypothesis that industry knowledge serves as a substitute for verified financial information. The negative relation between industry exposure and audited statement collection strengthens as the bank gains experience. Both findings are interesting insofar as community banks rely on "soft" information, such as personal relationships with borrowers, rather than "hard" information, such as credit scores.
Reaction to the Community Bank Regulatory Issues Session Todd Vermilyea and Glen Jammaron
Community Bank Regulatory Issues- Moderated Question and Answer Session
Speakers and Panelists
James Bullard is the president and CEO of the Federal Reserve Bank of St. Louis. In that role, he is a participant on the Federal Reserve’s Federal Open Market Committee (FOMC), which meets regularly to set the direction of U.S. monetary policy. He also oversees the Federal Reserve’s Eighth District, including activities at the St. Louis headquarters and its branches in Little Rock, Arkansas, Louisville, Kentucky, and Memphis, Tennessee. A noted economist and policymaker, Bullard makes Fed transparency and dialogue a priority on the international and national stage as well as on Main Street. He serves on the board of directors of the St. Louis Regional Chamber and the board of directors of Concordance Academy of Leadership, and he is a past board chair of the United Way U.S.A. Bullard is co-editor of the Journal of Economic Dynamics and Control, and a member of the Central Bank Research Association’s senior council. He is an honorary professor of economics at Washington University in St. Louis, where he also sits on the advisory council of the economics department and the advisory board of the Center for Dynamic Economics. A native of Forest Lake, Minnesota, Bullard received his doctorate in economics from Indiana University in Bloomington.
Julie Stackhouse is executive vice president and managing officer of supervision, credit, community development and learning innovation for the Federal Reserve Bank of St. Louis. Prior to joining the St. Louis Fed in September 2002, Stackhouse served as vice president and managing officer of the Risk Management department of the Federal Reserve Bank of Minneapolis. In addition, she was formerly an officer with the Federal Reserve Bank of Kansas City prior to relocating to Minnesota in 1995. She served in many capacities at the Kansas City Reserve Bank, starting as an examiner in 1980. Stackhouse holds a bachelor's degree in business administration from Drake University and is a graduate of the Wisconsin Graduate School of Banking. She currently serves as president-elect of the Board for National Charity League, Inc., a mother-daughter philanthropic organization, and as a member of the St. Louis Forum. In 2010, Stackhouse was named a St. Louis Business Journal “Most Influential Business Women” recipient, and in 2016, was recognized with the Delta Sigma Pi Lifetime Achievement Award.
Michael Stevens is the senior executive vice president at the Conference of State Bank Supervisors (CSBS). He is responsible for leading the organization's public policy, financial supervision, federal coordination, communications, industry relations and professional development functions. Stevens also serves as the principal deputy to the state banking member of the Financial Stability Oversight Council. Prior to his appointment in September 2011, he served as the senior vice president for regulatory policy, representing the state banking system in the development of policy in the areas of financial stability, prudential supervision and consumer protection. He joined CSBS in 1999 to work in all facets of CSBS's professional development division. Stevens is a frequent instructor and speaker on banking policy, examinations and financial analysis. He serves on the faculty of the Graduate School of Banking at Colorado and at Texas Tech University's School of Banking. He began his regulatory career as a bank examiner for the Iowa Division of Banking, where he served 11 years.
Darrin Williams is the CEO of Arkadelphia, Ark.-based Southern Bancorp Inc., a $1.2 billion asset financial organization with more than 80,000 customers and 43 locations primarily in underserved markets in the Mid-South. As CEO, Williams oversees the strategic direction and operations of each of Southern's three Community Development Financial Institutions: Southern Bancorp Inc., a bank holding company; Southern Bancorp Bank, one of America's largest rural development banks; and Southern Bancorp Community Partners, a 501(c)(3) development finance and lending organization – collectively known as "Southern." Prior to leading Southern, Williams served as managing partner at the law firm of Carney, Williams, Bates, Pulliam & Bowman, PLLC, where he represented institutional investors and consumers in class action litigation against some of the nation's largest publicly traded companies. He also served three terms in the Arkansas House of Representatives (2008-2013), serving as Speaker Pro Tempore of the 89th Arkansas General Assembly. He was listed as one of 12 state legislators from around the country to watch by Governing magazine. Williams received his Bachelor of Arts from Hendrix College, Conway, Ark.; his Juris Doctor from Vanderbilt University School of Law, Nashville, Tenn.; and his Master of Laws degree in securities and financial regulation from Georgetown University Law Center in Washington, D.C.