Circular
Community Reinvestment Act
September 23, 1998
Circular No. 11093

Availability of 1997 Data on Small Business, Small Farm,
and Community Development Lending Reported by
Commercial Banks and Savings Associations

To All State Member Banks and Bank Holding Companies in the Second Federal Reserve District:

The following is from a press release issued by the Federal Financial Institutions Examination Council:

The Federal Financial Institutions Examination Council (FFIEC) has announced the availability of data on small business, small farm, and community development lending reported by commercial banks and savings associations (including savings banks and savings and loan associations) pursuant to the Community Reinvestment Act (CRA).

As revised in 1995, the regulations that implement the CRA generally require the reporting of data on these types of lending by independent commercial banks and savings associations having total assets of $250 million or more, and by commercial banks and savings associations of any size if owned by a holding company having assets of $1 billion or more. Analysis of Call Report data indicates that reporting institutions account for about two-thirds of the small business loans and one-fifth of the small farm loans extended by all commercial banks and savings associations.

From the data reported, the FFIEC prepares a disclosure statement, in electronic form, for each reporting commercial bank and savings association. The FFIEC also prepares an aggregate disclosure statement for each of the metropolitan statistical areas and each of the nonmetropolitan counties in the United States and Puerto Rico.

The 1997 data reflect originations and purchases of small business and small farm loans from 1,896 institutions, including 1,421 commercial banks and 475 savings associations. (See attached fact sheet and related tables.) A total of 2.6 million small business loans, totaling $159 billion, and 213,000 small farm loans, totaling $11 billion, were reported for 1997. Measured by number of loans, 50 percent of the reported small business loans and 90 percent of small farm loans were extended to borrowers with revenues of $1 million or less. For small business loans, this proportion has decreased 6 percentage points from the 56 percent reported in 1996. The vast majority (about 87 percent, by number of loans) of small business and small farm loans were for amounts under $100,000. Small business loans are heavily concentrated in central city and suburban areas, as are both the U.S. population and U.S. businesses. The variation in small business lending among census tracts grouped into income categories generally parallels the distribution of the population and businesses among these categories. Reporting institutions that have assets of more than $750 million (594 of the 1,896 institutions reporting) extend a greater number of small businesss loans in lower income areas than do other institutions. Most small farm loans are made in rural areas regardless of income.

For 1997, commercial banks and savings associations reported community development lending that totaled nearly $19 billion. Compared with small business and small farm lending, the typical community development loan was relatively large ($745,000).

A community development loan has as its primary purpose affordable housing for low- or moderate-income individuals, community services targeted to these individuals, activities that promote economic development by financing small businesses and small farms, and activities that revitalize or stabilize low- or moderate-income geographies. In general, a community development loan has not been reported for CRA purposes as a consumer, home-mortgage, small business, or small farm loan (except for multifamily dwelling loan reported under the Home Mortgage Disclosure Act (HMDA)).

The FFIEC has distributed aggregate disclosure statements to central depositories throughout the nation, where they are available for public inspection. Following that distribution, the FFIEC determined that a reporting error by one institution caused the number of community development loans as presented in the aggregate table to be overstated materially. Table 5, attached to this release, reflects the correction of this error.

Available are the fact sheet and the CRA Data Order Form referred to in the above statement.

Questions on this matter may be directed, at this Bank, to Janice A. Oser, Examining Officer, Compliance Examinations Department.