Regional banks are faring slightly better in the post-recession economy than the Big Four banks (Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo), according to research from the Brookings Institution. Excluding the period during the financial crisis, regional banks have grown slowly but steadily since 2003. And despite consolidation, the Big Four represent a smaller share of the banking sector than they did in 2007.
This is good news for small businesses, as regional banks are offering more loans than the large nationals. Still, a gap remains between deposits and loans at the regional level, albeit a smaller one than that of the Wall Street giants.
Brookings found several commonalities across regional banks, including:
- Their total assets have risen strongly since 2010;
- Loans and leases by far comprise their largest chunk of assets; and
- Liabilities are heavily concentrated in domestic deposits.
The experience of Ohio manufacturer MT Heat Treat isrepresentative of these new banking realities (Wall Street Journal). Despite ample security, the company was turned down for a loan by a large national bank. Enter Cleveland-based KeyBank, which was able to provide a larger loan than initially requested. KeyBank and other local and regional banks are seeing the benefits of going back to basics:
KeyBank has returned to what it sees as a more sustainable growth path, bolstered by those rapidly growing loans to manufacturers. Unlike most of the big Wall Street firms, which still rely on a wider range of lending activities, as well as riskier securities trading, KeyBank’s success is increasingly tied to commercial loans it makes—many in local communities.
Recognizing the strength of manufacturing loans, KeyBank has hired several additional loan officers and is expanding research into industrial technology in order to broaden its loan packages.