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Journal of Financial Stability Vol. 77 2025

The performance of FDIC-identified community banks

Athina Petropoulou1; Vasileios Pappas2; Steven Ongena3,4,5,6,7; Dimitrios Gounopoulos8; Richard Fairchild8

1 University of Sussex · 2 University of Surrey · 3 University of Zurich · 4 Centre for Economic Policy Research · 5 NTNU Samfunnsforskning · 6 Swiss Finance Institute · 7 KU Leuven · 8 University of Bath

open access

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.

DOI
10.1016/j.jfs.2025.101394
Volume
77
Pages
101394
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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