The performance of FDIC-identified community banks

Athina Petropoulou; Vasileios Pappas; Steven Ongena; Dimitrios Gounopoulos; Richard Fairchild

doi:10.1016/j.jfs.2025.101394

The performance of FDIC-identified community banks

Athina Petropoulou, Vasileios Pappas, Steven Ongena, Dimitrios Gounopoulos, Richard Fairchild

Research output: Contribution to journal › Article › peer-review

Abstract

In recognizing the uniqueness of their business model, the FDIC launched a new community bank definition in 2012 (reaffirmed in 2020) that changed its approach to identifying this bank group. This paper examines the impact of this re-defined community bank status on bank performance. Using a quasi-difference-in-differences approach, the study finds that banks that obtain the community bank status exhibit greater financial stability and lower risk, with lending and deposit structures mediating these effects. These findings offer new insights into a “warm glow” effect brought by the re-classification, affecting the performance of these institutions. By assigning the community bank status, the FDIC may have tapped into the social and emotional significance tied to the word “community” for various stakeholders.

Original language	English
Article number	101394
Journal	Journal of Financial Stability
Volume	77
Early online date	12 Feb 2025
DOIs	https://doi.org/10.1016/j.jfs.2025.101394
Publication status	Published - 31 Mar 2025

Data Availability Statement

The authors do not have permission to share data.

Acknowledgements

We thank two anonymous referees, Thorsten Beck, Hong Bo, Robert DeYoung, Iftekhar Hasan (the editor), Marwan Izzeldin, Dimitris Kenourgios, Jeffrey Ighedosa, Roman Matousek, Ioannis Mpasiakos, Victor Murinde, Anthony Murphy, David Newton, Jaideep Singh Oberoi, Moses Tefula, Mike Tsionas, Sulait Tumwine, Jon Williams, and Ru Xie for useful comments and suggestions. The authors are grateful to participants of the 2019 IFABS Conference (Nantes), the 2020 HFAA Conference (Online), the SOAS Centre for Global Finance and the National and Kapodistrian University of Athens research seminars for valuable suggestions. We also thank the Division of Insurance and Research at the FDIC for their prompt responses in dealing with the community banking dataset. Vasileios Pappas acknowledges research support from the GulfOne Lab for Computational and Economic Research (GOLCER), Lancaster University.

Keywords

Bank performance
Community bank
Federal Deposit Insurance Corporation (FDIC)

ASJC Scopus subject areas

Finance
General Economics,Econometrics and Finance

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Cite this

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The performance of FDIC-identified community banks

Abstract

Data Availability Statement

Acknowledgements

Keywords

ASJC Scopus subject areas

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