Fe d e r a l De p o s it 

I n s u r a n c e 

C o r p o r a t ion 

Divisio n o f I n su r a n c e 

a n d Re s e a r c h

Div is io n o f De p o s ito r 

a n d C o n s u m e r 

P ro te c t ion

CBAC 2017|PREVIEW

FDIC SMALL BUSINESS 

LENDING SURVEY 

November 1, 2017
 Small businesses an important 

component of U.S. economy

 Small businesses rely on bank 

financing

 But bank small business lending 

understudied due to lack of data

Why the Need for a 

Small Business Lending Survey?

CBAC 2017|Preview FDIC Small Business Lending Survey 2
 The only nationally representative survey of 

banks and small business lending

 Universe: 5,979 U.S. banks with branches in 

50 states and DC

 Sample: 1,961

 Responses: 1,174 (60%)

 Small Banks defined <10B 

Small Business Lending Survey (SBLS)

is Nationally Representative

CBAC 2017|Preview FDIC Small Business Lending Survey 3
 Cognitive & Usability Testing

 Four rounds of one-on-one discussions

 51 Banks, mostly community banks

 11 States

 45 Towns and Cities

 Questions focus on 2015 activities

 Survey fielded 2016 and 2017

SBLS Developed in Partnership 

with Community Banks

CBAC 2017|Preview FDIC Small Business Lending Survey 4
 Small business borrower characteristics

 Market area and competitors 

 Perceived competitive advantages

 Loan products & underwriting

 Practices to generate and maintain small 

business lending relationships

 Expectations

 Small business C&I originations and 

outstanding loans, for some banks

Topics Covered by the SBLS

CBAC 2017|Preview FDIC Small Business Lending Survey 5
2016 

Small

Business

Lending

Survey

I. Measuring Small Business

Lending by Small Banks

II. The Nature of Small Business 

Lending by Small Banks

III. What Makes Small Banks Special?

 SBLS: CBAC Preview

6
2016 

Small

Business

Lending

Survey

I. Measuring Small Business

Lending by Small Banks 

 

 1. Relying on Call Report proxy understates 

small business lending by Small Banks 

2. Today we show three different ways 

Survey demonstrates small business lending

by Small Banks is understated

 SBLS Insights

7
CALL Report Proxy Understates

Small Business Lending by Small Banks

I. Measuring Small Business Lending by Small Banks 8

2015 Q4 Call Report: 

Small Loans to Businesses

 C&I Loans 

 with 

 Loan Amount 

 <= $1M:

$118B

Commercial 

Real Estate 

Loans with 

Loan Amount 

<= $1M

Agricultural 

Production and 

Farmland Loans 

with Loan 

Amount 

<= $500K

All banks able to report data collected by Call Report proxy
Small Banks (<10B): 3 to 15% of C&I Originations 

Secured by 1-4 Family Residential Properties

I. Measuring Small Business Lending by Small Banks SBLS Q8/9 9

2015 Q4 Call Report: 

Small Loans to Businesses

Loans Secured by 

1-4 Family 

Residential 

Properties

 C&I Loans 

 with 

 Loan Amount 

 <= $1M:

$118B

Commercial 

Real Estate 

Loans with 

Loan Amount 

<= $1M

Agricultural 

Production and 

Farmland Loans 

with Loan 

Amount 

<= $500K (a) But for C&I

purposes:

$16B
Banks 1B to 10B: 20% of Outstanding 

CALL C&I Loans Originated at >1M 

to Small Businesses (Revenues <1M)

I. Measuring Small Business Lending by Small Banks SBLS Q14 10

 

C&I Loans 

 with 

 Loan Amount 

 > $1M

2015 Q4 Call Report: 

Small Loans to Businesses

Loans Secured by 

1-4 Family 

Residential 

Properties

 C&I Loans 

 with 

 Loan Amount 

 <= $1M:

$118B

Commercial 

Real Estate 

Loans with 

Loan Amount 

<= $1M

Agricultural 

Production and 

Farmland Loans 

with Loan 

Amount 

<= $500K

(b) To Small 

Businesses (by 

Banks 1B to 10B): 

$21B

(a) But for C&I

purposes:

$16B
Banks <1B: 77 to 86% say “Largely All” of 

Their C&I Lending is to a Small Business

I. Measuring Small Business Lending by Small Banks SBLS Q2 11

 C&I Loans 

 with 

 Loan Amount 

 > $1M

2015 Q4 Call Report: 

Small Loans to Businesses

Loans Secured by 

1-4 Family 

Residential 

Properties

 C&I Loans 

 with 

 Loan Amount 

 <= $1M:

$118B

Commercial 

Real Estate 

Loans with 

Loan Amount 

<= $1M

Agricultural 

Production and 

Farmland Loans 

with Loan 

Amount 

<= $500K

(c) To Small 

Businesses 

(by Banks <1B): 

$93M

(b) To Small 

Businesses (by 

Banks 1B to 10B): 

$21B

(a) But for C&I

purposes:

$16B
CALL Report Proxy Understates

Small Business Lending By Small Banks

By At Least $38B

I. Measuring Small Business Lending by Small Banks 12

2015 Q4 Call Report: 

Small Loans to Businesses

 C&I Loans 

 with 

 Loan Amount 

 <= $1M:

$118B

Commercial 

Real Estate 

Loans with 

Loan Amount 

<= $1M

Agricultural 

Production and 

Farmland Loans with 

Loan Amount 

<= $500K

Small Business 

C&I Lending 

Understated 

by at Least 

$38B
2016 

Small

Business

Lending

Survey

II. The Nature of Small Business 

Lending by Small Banks

1. Small Banks offer loan products for

various purposes, focus on traditional

underwriting and owner & business 

characteristics, and lend to startups 

2. Small Banks interact locally and are 

high touch, relying on staff intensive 

interpersonal engagement

 SBLS Insights

13
Small Banks Equally Likely to Have

Amortizing Term Loans, Lines of Credit &

Balloon Term Loans as Top Small Business Product

II. The Nature of Small Business Lending by Small Banks SBLS Q19 14
Term Loans Most Often Used for Equipment/Fixed Assets

LOCs for Working Capital & Inventory

II. The Nature of Small Business Lending by Small Banks SBLS Q22c 15
Small Banks Focus on Traditional Underwriting Criteria

and Owner & Business Characteristics

II. The Nature of Small Business Lending by Small Banks SBLS Q22e 16
Most Small Banks Lend to Startups

Especially Small Banks in Non-MSA Areas

II. The Nature of Small Business Lending by Small Banks SBLS Q21c 

The median Small Bank defines a startup to be a new small business 2 years of age or less

17
Small Banks Primarily Accept Small Business Loan 

Applications at Branches and with Staff, not Online

III. The Nature of Small Business Lending by Small Banks SBLS Q23 18
Small Banks Generate and Maintain Relationships 

Through High Touch Practices

III. The Nature of Small Business Lending by Small Banks SBLS Q24 19
2016 

Small

Business

Lending

Survey

III. What Makes Small Banks

Special?

1. Small Banks are seen as relational,

attentive, fast, and flexible

2. Small Banks have distinct advantages over 

Large Banks, and are more able to customize

3. Small Banks are major competitors

for small business lending, and even 

Large Banks think so

 SBLS Insights

20
Small Banks Say Bank Competitors <1B Compete 

Using Relationship, Attention & Decision Speed

III. What Makes Small Banks Special? SBLS Q17 21
Large Banks Say Bank Competitors 1B to <10B 

Compete Using Loan Structure Flexibility

III. What Makes Small Banks Special? SBLS Q17 22
Small Banks More Likely to See Themselves

Attentive, Fast, Flexible

III. What Makes Small Banks Special? SBLS Q18

Own Primary 

Competitive 

Advantage

Small 

Banks

Large 

Banks

Who Is More Likely to 

Report Advantage?

Relationship 59% 57%

Same

Staff Quality 30% 33%

Personal Attention 58% 43%

Decision Speed 49% 24% Small Banks

Loan Structure Flexibility 25% 20%

Number of Locations 2% 22%

Credit Products Offered 8% 18% Large Banks

Convenient Locations 11% 16%

Options not Shown: Collateral, DSC, Fees, Interest Rates, LTV, Mobile Banking, Remote Deposit, Speed, Funding Term. 

23
Small Banks Customize

Large Banks Standardize

III. What Makes Small Banks Special? SBLS Q5/3/4/22b

 Small Banks are much less likely to use standardized 

small business loan products (9 vs 65%)

 Small Banks are much less likely to use thresholds to 

define small businesses (28 vs 85%)

 Small Banks are much less likely to use minimum loan 

amounts (15 vs 70%)

24
Local Small Banks are Major Competitors 

for Small Business Lending

III. What Makes Small Banks Special? SBLS Q16 25
2016 

Small

Business

Lending

Survey

I. Measuring Small Business

Lending by Small Banks

 1 . R e l y i n g o n C a l l R e p o r t p r o x y u n d e r s t a t e s s m a l l b u s i n e s s 

l e n d i n g b y S m a l l B a n k s 

2 . T o d a y w e s h o w t h r e e d i f f e r e n t w a y s S u r v e y d e m o n s t r a t e s 

s m a l l b u s i n e s s l e n d i n g b y S m a l l B a n k s i s u n d e r s t a t e d

II. The Nature of Small Business 

Lending by Small Banks

1. S m a l l B a n k s o f f e r l o a n p r o d u c t s f o r v a r i o u s p u r p o s e s , 

f o c u s o n t r a d i t i o n a l u n d e r w r i t i n g a n d o w n e r & b u s i n e s s 

c h a r a c t e r i s t i c s , a n d l e n d t o s t a r t u p s 

2 . S m a l l B a n k s i n t e r a c t l o c a l l y a n d a r e h i g h t o u c h , r e l y i n g o n 

s t a f f i n t e n s i v e i n t e r p e r s o n a l e n g a g e m e n t

III. What Makes Small Banks Special?

1 . S m a l l B a n k s a r e s e e n a s r e l a t i o n a l , a t t e n t i v e ,

f a s t , a n d f l e x i b l e

2 . S m a l l B a n k s h a v e d i s t i n c t a d v a n t a g e s o v e r L a r g e B a n k s , a n d 

a r e m o r e a b l e t o c u s t o m i z e

3 . S m a l l B a n k s a r e m a j o r c o m p e t i t o r s f o r s m a l l b u s i n e s s l e n d i n g ,

a n d e v e n L a r g e B a n k s t h i n k s o

 SBLS Insights: Takeaways

26
 Data weighted to reflect bank universe

 Values are not be reported when the number 

of responses did not meet disclosure review 

thresholds for protecting respondents’ 

identities

 Reported percentages do not necessarily add 

to 100 if questions allow more than one 

answer or if certain categorical response 

options do not meet the disclosure review 

thresholds for protecting respondents’ 

identities

TECHNICAL NOTES

CBAC 2017|Preview FDIC Small Business Lending Survey 27
 Call Report Proxy Understatement Extrapolation 

for C&I Loans Collateralized by 1-4 family 

Residences:

1. We first extrapolated total C&I originations in 2015 

using the lower bound of the 95 percent confidence 

interval of the ratio of survey reported 2015 C&I 

originations to 2015 Q4 call report portfolio holdings. 

2. We then extrapolated the share of total C&I originations 

collateralized by 1-4 family residences by taking the 

lower bound of the 95 percent confidence interval of 

the survey reported 1-4 family secured C&I originations 

divided by total survey reported C&I originations, and 

applying this ratio to the extrapolated total 2015 C&I 

originations from (1). 

3. These extrapolations were computed separately for 

banks with assets less than $250M, banks with assets 

between $250M and $1B, and banks with assets 

between $1B and $10B.

TECHNICAL NOTES

CBAC 2017|Preview FDIC Small Business Lending Survey 28
 Call Report Proxy Understatement 

Extrapolation for C&I Loans of >$1M by 

Banks with Assets Between $1B and $10B:

1. We used the lower bound of the 95 percent

confidence interval of the survey estimated mean

share of C&I loans of >$1M that were made to

businesses with total annual revenues of <= $1M

2. We then applied the lower bound mean share

calculated in (1) to the total dollar volume of C&I

loans of >$1M reported in the 2015 Q4 call report.

TECHNICAL NOTES

CBAC 2017|Preview FDIC Small Business Lending Survey 29
 Call Report Proxy Understatement Extrapolation 

for C&I Loans of >$1M by Banks with Assets 

Less than $1B:

1. We used 50% as a conservative interpretation of 

“almost all” C&I lending to small businesses. 

2. For each bank, we computed the dollar volume of C&I 

loans that would constitute 50% of their total C&I loan 

portfolio as of 2015 Q4, and computed the amount of 

C&I loans of >$1M included in the 50%. For banks 

whose C&I loans of <=$1M already constitute 50% or 

more of their total C&I portfolio, the amount of C&I 

loans of >$1M included in the 50% is $0.

3. We then ranked ordered the banks by the amount of 

C&I loans of >$1M included in the 50%, from smallest 

to largest. (Where some banks will have $0 values 

because already more than half of their C&I portfolio 

are in loans of <=$1M.)

(continued)

TECHNICAL NOTES

CBAC 2017|Preview FDIC Small Business Lending Survey 30
 Call Report Proxy Understatement 

Extrapolation for C&I Loans of >$1M by 

Banks with Assets Less than $1B (cont’d):

4. In the Survey, for banks with less than $250M in 

assets, 86% report that “largely all” of their C&I lending 

is to small businesses. Therefore, we summed the C&I 

loan dollars of >$1M included in the 50%, for the lowest 

86% of these ranked banks. 

5. In the Survey, for banks with $250M to $1B in assets, 

77% report that “largely all” of their C&I lending is to 

small businesses. Therefore, we summed the C&I loan 

dollars of >$1M included in the 50%, for the lowest 77% 

of these ranked banks.

TECHNICAL NOTES

CBAC 2017|Preview FDIC Small Business Lending Survey 31