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The performance of FDIC-identified community banks

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

Journal of Financial Stability, 2025, vol. 77, issue C

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.

Keywords: Community bank; Federal Deposit Insurance Corporation (FDIC); Bank performance (search for similar items in EconPapers)
JEL-codes: G14 G21 G38 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:77:y:2025:i:c:s1572308925000233

DOI: 10.1016/j.jfs.2025.101394

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