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Community banks support lion’s share of small business and farms

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A report on the community banking sector by the New York State Department of Financial Services concluded that loans from community banks provide a disproportionately large percentage of loans to the state’s businesses and farms.

The report found that 90 percent of all small farm loans and 55 percent of all small business loans are provided by community banks who hold less than a quarter of the state’s bank assets.

It also found that even community banks with relatively small holdings (assets less than $1 billion) provide 28 percent of all small business loans in the state.

The report crunches data between 1992 and 2011 and only considers community banks with their business headquarters in New York.

Other findings of the report show that community banks were able to increase their market share to 55 percent in the decade 2001-2011.

The report also pointed to challenges for the sector citing a need to reduce costs, diversify income streams and deal with the prospect of ongoing change in banking technology.

New capital requirements (called the Basel III rules) and proposed regulations are also going to generate some additional hurdles for community banks.

In a written statement, Department of Financial Services Superintendent Benjamin Lawsky said:

Community banks focus on the unique needs of their communities. They build strong customer relationships which help attract local retail deposits. These banks take deposits from their communities and then typically recycle them back into their communities in the form of loans.

New York Sen. Kirsten Gillibrand, a Democrat, has proposed legislation to give credit unions greater flexibility in lending to small business by raising the current lending caps on those institutions.

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