Location and Access to Banking

Location and Access to Banking

Location Should Not Determine Banking Access

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Residential lending is a pillar supporting economic growth in the U.S. and community banks are the base of that pillar. The Conference of State Bank Supervisors (CSBS) puts it this way: "Community banks offer tailored mortgages to homebuyers in local communities throughout the country… community banks engaged in portfolio lending are fully motivated to make sure the borrower is able to repay the loan… the interests of borrowers and community bank portfolio lenders are inherently aligned."

Bauer could not agree more. We have included a list of the 50 community banks with the most residential real estate loans outstanding (among those where at least 10% of their loans are in residential real estate) on page 7 of this issue. As you can see, all are successfully navigating the shared interests of the bank and its borrowers that the loans are repaid as agreed - none on the list are rated less than 3-Stars and most have earned Bauer's top 5-Star rating.

Let's dig a bit deeper and see how community banking and residential real estate (loans secured by first or second liens on 1-4 family residential properties) play out in various parts of the country.

Hawaii, for example, only has six community banks in the whole state and four of them made our list. That may seem surprising until we see that a report earlier this month from Business Insider in conjunction with Zillow lists Hawaii as the most expensive state in which to buy a home with a median home value of $636,451. That takes a big mortgage.

The Northeast Region may also seem disproportionately represented, but it is home to nearly half (44%) of the nation's Thrifts and Savings Banks - institutions whose histories are rooted in residential lending.

Nationwide, the smallest banks, those with less than $100 million in assets, have 33% of their loan portfolios devoted to their customer's homes. Similarly, those with assets from $100 through $1 billion have about 30% of their loans invested in 1-4 family homes. The larger banks, those with over $1 billion in assets, average around 25%. 

Looking at individual banks for context, we see 5-Star North American Savings Bank (NASB) in Missouri is number 15 on the list. Its assets increased by 21% in the 12 months ended September 30, 2019 while its 1-4 family residential lending increased by 32%. Although NASB is a community bank, it is one of the top 15 Veterans Administration lenders in the country, having helped over 15,000 veteran homeowners close more than $4.5 billion in home loans.

4-Star NexBank, Dallas, TX more than doubled its residential real estate loans between September 30, 2018 and September 30, 2019. The bank has three divisions: Commercial Banking, Mortgage Banking and Institutional Services. The exceptional increase in real estate lending was partially offset by decreases in Commercial and Individual loans.

And then there's 3½-Star Howard Bancorp in Maryland which ranked at 112 for the community banks with the most residential real estate loans at the end of the 3rd quarter 2019. It announced last week that it is divesting itself of its mortgage business to remain focused "on successfully, sustainably and now singularly building momentum in its core commercial banking business."

As we move forward in this new decade, Bauer will do its part to keep our nation's community banking system strong by reporting on both the good and not-so-good trends because we, like the Federal Reserve of Atlanta, believe that 'the place one lives should not determine access to opportunity' and that therefore 'preserving and maintaining the viability of community banks should be a priority.'

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