FDIC Quarterly - 2015 Volume 9, Number 4

The FDIC Quarterly released today includes a feature article on the Financial Performance and Management Structure of Small, Closely Held Banks. Small, closely held banks have often been thought to have disadvantages compared to larger competitors, but this article uses the results of a new FDIC study to show that small, closely held community banks have consistently outperformed widely held institutions in recent years in terms of return on assets and operational efficiency. Of nearly 1,400 community banks surveyed in three supervisory regions, nearly 75 percent were deemed by FDIC examiners to be “closely held” by an ownership group that was almost always based on family or community ties, or both. In almost 60 percent of these institutions, the key officer that managed the bank was either part of or affiliated with the ownership group. This set of institutions—where ownership and management overlap—reported the highest financial performance since 2009, suggesting that bank profitability may improve if ownership and management are on the same page and share the same goals. The real challenge for small, closely held banks may be to find equally qualified successors to manage the institution over the long run.


This issue of the FDIC Quarterly also includes third quarter 2015 industry results from the Quarterly Banking Profile, which was released on November 24, 2015.