Trends in Home Purchase Lending: Consolidation and the Community Reinvestment Act.Consolidation among banking institutions has substantially changed the structure of the banking industry. Between 1975 and 1997, the number of commercial banks and savings associations declined more than 40 percent. Most of this change was due to mergers and acquisitions, though in some years failures and liquidations were also important. Recent mergers and acquisitions have had particularly sizable siz·a·ble also size·a·ble adj. Of considerable size; fairly large. siz  a·ble·ness n. effects on the
shape of the industry, as many have involved the nation's largest
and the most geographically ge·o·graph·ic also ge·o·graph·i·caladj. 1. Of or relating to geography. 2. Concerning the topography of a specific region. ge diverse banking institutions. Over the same broad period, the market for home mortgage lending has changed substantially. Notably, home mortgage lending is no longer primarily the province of banking institutions operating in the communities in which they have banking offices.(1) In recent decades, mortgage and finance companies and banking organizations operating outside their local communities have gained a significant share of the mortgage market.(2) Today, fewer than half of all home mortgage loans extended in any given community are originated by banking organizations with banking offices, in that community. These changes have fueled debate regarding their effects on the provision of home mortgage loans. One particular concern is that, as a consequence of these changes, lower-income and minority borrowers and borrowers in lower-income and minority neighborhoods may face reduced access to mortgage credit. In part, this concern reflects the belief that a shift away from lending by institutions with local banking offices and acquisitions of small community-based banking institutions by large regional or national organizations may result in a transfer of decision-making decision-making, n the process of coming to a conclusion or making a judgment. decision-making, evidence-based, n a type of informal decision-making that combines clinical expertise, patient concerns, and evidence gathered from authority from those familiar with the needs of local communities to those less knowledgeable about, and thus less responsive to, such needs. This article explores this issue by examining the relationship between consolidation among banking organizations in local markets and changes in home purchase lending over the 1993-97 period. We examine changes in total lending as well as changes in lending to lower-income and minority borrowers and neighborhoods.(3) Previous research has considered the effects of consolidation on various aspects of banking, including small business lending, product pricing, and the geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. distribution of banking offices.(4) These studies indicate that, in some cases, consolidation may significantly affect the provision of financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. . This article extends the line of research by exploring the relationship between consolidation and lending to purchase homes. This article also examines a related issue. Banking institutions have a legal responsibility to help serve the credit needs of their local communities--those areas in which they operate banking offices. The Community Reinvestment Act Community Reinvestment Act (CRA) Enacted by Congress in 1977, the CRA encourages banks to help meet the credit needs of their communities for housing and other purposes, particularly in neighborhoods with low or moderate incomes, while maintaining safe and sound operations. (CRA See Community Reinvestment Act. ) of 1977 encourages banking institutions to help meet the credit needs of their local communities, including those of lower-income borrowers and of borrowers residing in lower-income neighborhoods.(5) Because credit availability is believed to be essential to the economic health and vitality vi·tal·i·ty n. 1. The capacity to live, grow, or develop. 2. Physical or intellectual vigor; energy. of neighborhoods, we also examine the relationship between consolidation and changes in home purchase lending by institutions in those areas where they have CRA responsibilities. Little previous research has been done on this narrower issue. Until recently, only limited information has been available to systematically assess these issues. The analysis in this article relies on a new, specially constructed database that uses information on mergers, acquisitions, and failures of commercial banks and savings associations and data on the location of banking offices and neighborhood economic and demographic See demographics. characteristics. These data are combined with data obtained pursuant to the Home Mortgage Disclosure Act (HMDA HMDA Hexamethylene Diamine (chemistry) HMDA Hitchhiker Motorized Door Assembly HMDA High Mobility DGM Assemblage HMDA Home Mortgage Disclosure Act of 1974 ) for the years 1993 through 1997 on home purchase lending.(6) OVERVIEW OF THE RESULTS When measured at the market (county) level, the level of consolidation activity among banking organizations appears to have had little relationship to changes in home purchase lending, both overall and to lower-income and minority borrowers and neighborhoods. This finding suggests that, in general, consolidation has not had significant anticompetitive an·ti·com·pet·i·tive adj. That discourages competition among businesses: anticompetitive foreign trade restrictions. effects on home purchase lending and that lending to lower-income and minority borrowers and neighborhoods has not been adversely affected by consolidation. This result holds despite the fact that consolidating organizations reduced their home purchase lending substantially in those areas in which they had banking offices. It appears that this reduction was more than offset by expanded home purchase lending by banking organizations in areas where they did not operate banking offices and by independent mortgage and finance companies and credit unions. In particular, consolidating banking organizations expanded their lending dramatically in areas where they did not operate banking offices. Thus, the very organizations that reduced their lending in markets where they operated offices were the organizations that expanded most in other areas. This result suggests that a driving force underlying changes in the home purchase lending market has been a desire by banking organizations to diversify diversify To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries. their lending activity geographically. Although banking institutions involved in consolidation reduced their overall lending in the communities where they had banking offices, this reduction did not disproportionately dis·pro·por·tion·ate adj. Out of proportion, as in size, shape, or amount. dis  pro·por affect their lending to
lower-income and minority borrowers and neighborhoods. The analysis
shows that the typical consolidating organization generally increased
the proportion of loans it extended to each of these groups within its
local communities. These results are consistent with the view that the
CRA has been effective in encouraging banking organizations,
particularly those involved in consolidation, to serve lower-income and
minority borrowers and neighborhoods.A full understanding of these relationships requires a broader analysis and is beyond the scope of this article. For example, loan pricing, the complexity of product offerings, and the varied motivations driving consolidation must all be investigated fully to reach more definitive conclusions about the effects of consolidation on home purchase lending. It should also be emphasized em·pha·size tr.v. em·pha·sized, em·pha·siz·ing, em·pha·siz·es To give emphasis to; stress. [From emphasis.] Adj. 1. that the results presented here reflect aggregate trends and may not apply to any particular market or consolidation. TRENDS IN BANKING CONSOLIDATION Over the past twenty years TWENTY YEARS. The lapse of twenty years raises a presumption of certain facts, and after such a time, the party against whom the presumption has been raised, will be required to prove a negative to establish his rights. 2. , the number of banking institutions declined substantially, from 18,679 in 1975 to 11,077 in 1997--a decline of more than 40 percent. Just since 1993, the number of institutions has dropped about 18 percent. Consolidation during the 1980s and early 1990s was associated with a quickening quickening /quick·en·ing/ (kwik´en-ing) the first perceptible movement of the fetus in the uterus. quick·en·ing n. pace of merger and acquisition activity along with substantial numbers of failures and liquidations. More recently, the decline in the number of banking institutions has been overwhelmingly the result of mergers and acquisitions. From 1993 through 1997, the number of banking institutions acquired in a merger or acquisition totaled 2,839, or 21 percent of all institutions. Over the same period, only 40 institutions were liquidated DAMAGES, LIQUIDATED, contracts. When the parties to a contract stipulate for the payment of a certain sum, as a satisfaction fixed and agreed upon by them, for the not doing of certain things particularly mentioned in the agreement, the sum so fixed upon is called liquidated damages. (q.v. , and 431 new institutions were formed. Consolidation in the banking industry has been driven in important ways by technological advances, globalization globalization Process by which the experience of everyday life, marked by the diffusion of commodities and ideas, is becoming standardized around the world. Factors that have contributed to globalization include increasingly sophisticated communications and transportation of financial services markets, and efforts to increase efficiency, reduce costs, or gain competitive advantage. Besides the effects of these economic factors, the pace of consolidation has accelerated because of the relaxation re·lax·a·tion n. 1. The act of relaxing or the state of being relaxed. 2. Refreshment of body or mind. 3. A loosening or slackening. 4. The lengthening of inactive muscle or muscle fibers. of regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. restrictions on the ability of banking organizations to expand geographically and to establish banking offices, although some legal restrictions, including federal antitrust laws antitrust laws n. acts adopted by Congress to outlaw or restrict business practices considered to be monopolistic or which restrain interstate commerce. The Sherman Antitrust Act of 1890 declared illegal "every contract, combination.... , continue to restrict In the C programming language, the data pointed to by a pointer declared with the restrict qualifier may not be pointed to by any other pointer. This allows for more effective optimization. potential combinations.(7) (See box "Geographic Restrictions in Banking.") Much of the industry's consolidation has involved mergers and acquisitions among banks that had been operating in different local markets within the same state, in different states within the same geographic region, or even in different regions. As a result, consolidation has been accompanied ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. by a substantial broadening broad·en tr. & intr.v. broad·ened, broad·en·ing, broad·ens To make or become broad or broader. broad of the geographic reach of many banking organizations, so that many of the nation's largest organizations now operate across entire regions or even across multiple regions of the country. Whereas before 1980 only a handful of banking organizations operated in more than one state, by mid- mid- pref. Middle: midbrain. 1998, more than one-quarter of banking institution assets were owned by banking organizations with headquarters in another state. Moreover, a substantial increase has occurred in the share of total banking institution assets controlled by the largest banking organizations.(8) In many cases, mergers have had a significant effect on concentration in local banking markets, although, on average across the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , local market concentration has not increased substantially over time. One might expect this broad restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). of the industry to have potential implications for retail banking relationships, such as the provision of financial services to lower-income and minority communities. INDUSTRY CONSOLIDATION AND LENDING TO LOWER-INCOME AND MINORITY BORROWERS AND NEIGHBORHOODS Access to home mortgage credit among lower-income and minority borrowers and borrowers in lower-income and minority neighborhoods may be sensitive to changes caused by consolidation in the banking industry. This view derives from two general sets of arguments, which have potentially different implications. On the one hand, decentralized de·cen·tral·ize v. de·cen·tral·ized, de·cen·tral·iz·ing, de·cen·tral·iz·es v.tr. 1. To distribute the administrative functions or powers of (a central authority) among several local authorities. (local) decisionmaking may be especially important to a successful lower-income lending program, and consolidation may potentially reduce the role of local decisionmaking. On the other hand, because lending to lower-income and minority borrowers and neighborhoods sometimes involves special considerations of credit risk and often requires increased resources for risk-management activities, such lending may increase when consolidation improves the ability of institutions to efficiently evaluate, monitor, and manage credit risk. These potential effects can vary, depending on a number of factors, such as whether the institutions to be combined operate within the same local communities. Other factors include competitive interactions among institutions, regulatory considerations, and the diminished di·min·ish v. di·min·ished, di·min·ish·ing, di·min·ish·es v.tr. 1. a. To make smaller or less or to cause to appear so. b. role of savings associations. Ultimately, the effects of any given consolidation will depend on how it is implemented and on the commitment and ability of the management of the surviving institution to helping meet the credit needs of all segments of its community. The Role of Local Decisionmaking Successful home purchase lending to lower-income and minority borrowers and neighborhoods often requires considerable knowledge of the circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or prevailing in local neighborhoods and expertise in evaluating the credit risks associated with such lending.(9) Institutions active in such lending frequently use flexible credit standards Credit Standards The guidelines a company follows to determine whether a credit applicant is creditworthy. , nontraditional Adj. 1. nontraditional - not conforming to or in accord with tradition; "nontraditional designs"; "nontraditional practices" untraditional traditional - consisting of or derived from tradition; "traditional history"; "traditional morality" measures of credit quality, a variety of credit enhancements Credit Enhancement A method whereby a company attempts to improve its debt or credit worthiness. Notes: Credit enhancements take many different forms. An example of a credit enhancement would be conversion rights added on to a debt instrument in order to lower the issuing (such as private and public subsidies and guarantees), and intensive monitoring intensive monitoring Intensive care The continuous monitoring of Pt vital signs, with electronic hookups to the nursing station; IM encompasses real time measurement of BP and ABGs via arterial lines, pulse oximetry, continuous cardiac monitoring, respiration, of outstanding loans to expand their lending beyond those borrowers who are eligible for more conventional credit products. These institutions sometimes participate in local public agency programs in which the public authority provides funds, in the form of either grants or low-cost loans, to help meet the borrower's downpayment or closing costs Closing Costs The numerous expenses (over and above the price of the property) that buyers and sellers normally incur to complete a real estate transaction. Costs incurred include loan origination fee, discount points, appraisal fee, title search, title insurance, survey, taxes, , or sets up a fund to guarantee repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan of the loan. These lenders also work with community organizations to identify and counsel prospective loan applicants and to monitor borrower BORROWER, contracts. He to whom a thing is lent at his request. 2. The contract of loan confers rights, and imposes duties on the borrower' 1. In general, he has the right to use the thing borrowed, during the time and for the purpose intended between the repayment performance. Some believe that mergers and acquisitions may have an adverse effect on lending to lower-income and minority borrowers and neighborhoods when they result in a transfer of decisionmaking to those outside the local community. In this view, centralized cen·tral·ize v. cen·tral·ized, cen·tral·iz·ing, cen·tral·iz·es v.tr. 1. To draw into or toward a center; consolidate. 2. decisionmakers may find it more difficult to accurately assess nontraditional credit risks. They may have less knowledge about economic conditions or credit-risk factors specific to the local community, or they may have less flexibility in decisionmaking. Such concerns tend to be heightened when a large bank acquires a small bank, or when a bank is acquired by an institution that had not previously operated in the local market.(10) A related concern is that mergers and acquisitions, as well as failures, may lead to branch closings and the loss of lending personnel who are familiar with the needs of the local community. Real estate agents, home builders, and those working for nonprofit A corporation or an association that conducts business for the benefit of the general public without shareholders and without a profit motive. Nonprofits are also called not-for-profit corporations. Nonprofit corporations are created according to state law. groups or community organizations often develop working relationships with individual mortgage loan officers and may find the disruption disruption /dis·rup·tion/ (dis-rup´shun) a morphologic defect resulting from the extrinsic breakdown of, or interference with, a developmental process. of such relationships problematical prob·lem·at·ic also prob·lem·at·i·cal adj. 1. Posing a problem; difficult to solve: a repair that proved more problematic than first expected. 2. . Opportunities Created by Technology Transfer, Information Sharing See data conferencing. , and Risk Management Although mergers and acquisitions may lead to disruptions and changes in business relationships, some contend that consolidation often provides new opportunities to expand service to lower-income and minority borrowers and neighborhoods. Beneficial effects may arise through a variety of channels. For example, a small lender LENDER, contracts. He from whom a thing is borrowed. 2. The contract of loan confers rights, and imposes duties on the lender. 1. The lender has the right to revoke the loan at his mere pleasure; 9 Cowen, R. 687; 8 Johns. Rep. 432; 1 T. R. 480; 2 Campb. Rep. that becomes part of a larger organization may be able to take advantage of new technologies that reduce loan origination The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. costs, such as automated au·to·mate v. au·to·mat·ed, au·to·mat·ing, au·to·mates v.tr. 1. To convert to automatic operation: automate a factory. 2. underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. , thus potentially improving access to credit for consumers. More generally, mergers and acquisitions may result in greater efficiencies in underwriting, application processing, and loan-servicing activities if scale economies can be achieved or if the firm being acquired has been less well managed than the acquirer. The lifting of regulatory restrictions on geographic expansion may permit mergers that enhance the efficiency of the combined institutions, with the potential of making available additional resources for lending. Each of these efficiencies may increase an institution's ability to serve lower-income and minority borrowers and neighborhoods. Consolidation may generate a sufficient volume of activity or allow the pooling of information to enable the development of certain types of expertise. For instance, so-called so-called adj. 1. Commonly called: "new buildings ... in so-called modern style" Graham Greene. 2. informational returns-to-scale may be present by which merging banks gain sufficient volume to become specialists in lending in lower-income and minority communities, leading to greater efficiencies and reduced costs for such lending.(11) Another type of informational advantage may come from a consolidation in which the parties are able to pool mutually beneficial Adj. 1. mutually beneficial - mutually dependent interdependent, mutualist dependent - relying on or requiring a person or thing for support, supply, or what is needed; "dependent children"; "dependent on moisture" information that would otherwise remain private.(12) As noted, effective lending to lower-income borrowers often involves leveraging private- and public-sector funds. Public programs are frequently complex in their administration, and implementing such programs can require expenditures that smaller institutions have difficulty absorbing ab·sorb tr.v. ab·sorbed, ab·sorb·ing, ab·sorbs 1. To take (something) in through or as through pores or interstices. 2. To occupy the full attention, interest, or time of; engross. .(13) As a consequence, new credit-related programs and other types of public-sector resources that broaden access to credit may become available to the customers of an acquired bank that previously lacked sufficient resources to fully participate in these programs. Diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. of loan portfolios achieved through consolidation can potentially play an important role in fostering and sustaining a lending program targeted to lower-income borrowers or communities. Diversifying a portfolio by including loans from different, geographic areas and different customer bases, both within and across communities, can enable a lender to achieve more predictable and stable earnings. Portfolio diversification Portfolio diversification Investing in different asset classes and in securities of many issuers in an attempt to reduce overall investment risk and to avoid damaging a portfolio's performance by the poor performance of a single security, industry, (or country). may also enhance opportunities to package loans for resale resale n. selling again, particularly at retail. In many states a "resale license" or "resale number" is required so that the state can monitor the collection of sales tax on retail sales. RESALE. in the secondary market, thereby providing new avenues to raise funds for additional lending. Moreover, consolidation may enhance mortgage lending opportunities if an institution facing capital constraints CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. on additional lending merges Merges may refer to:
Market Performance Implications of Consolidation Consolidation may affect the competitive interaction among lending institutions Noun 1. lending institution - a financial institution that makes loans financial institution, financial organisation, financial organization - an institution (public or private) that collects funds (from the public or other institutions) and invests them in in a market, with possible implications for market performance. A reduction in competition brought about by consolidation might adversely affect the availability of credit or credit-related services in a community, although such effects might not disproportionately affect lower-income and minority borrowers and neighborhoods. One scenario A scenario (from Italian, that which is pinned to the scenery) is a synthetic description of an event or series of actions and events. In the Commedia dell'arte in which lending to minority borrowers and minority neighborhoods might be adversely affected, at least in the short run, is a reduction in competitive pressures that enables some lenders to engage in discriminatory dis·crim·i·na·to·ry adj. 1. Marked by or showing prejudice; biased. 2. Making distinctions. dis·crim practices.(14) More generally, if a reduction in competition in a given market results in higher prices or tighter credit standards, lower-income and minority borrowers may be disproportionately affected to the extent that a larger proportion of such borrowers are marginally mar·gin·al adj. 1. Of, relating to, located at, or constituting a margin, a border, or an edge: the marginal strip of beach; a marginal issue that had no bearing on the election results. 2. qualified. Consolidation may not only affect the behavior of the parties involved but may also have implications for other market participants The term market participant is used in United States constitutional law to describe a U.S. State which is acting as a producer or supplier of a marketable good or service. When a state is acting in such a role, it may permissibly discriminate against non-residents. . For instance, if the parties to a merger curtail cur·tail tr.v. cur·tailed, cur·tail·ing, cur·tails To cut short or reduce. See Synonyms at shorten. [Middle English curtailen, to restrict their lending to lower-income and minority borrowers and neighborhoods, then other banks in the market or new entrants may view this as an opportunity to gain customers. This expansion or entry by other institutions may offset some or all of the reduction in lending by the merged institution.(15) Such offsets are also possible for failed institutions: Many failed banks and savings associations are acquired by healthy organizations or are reopened by investors entering the banking business. The Role of Regulation One aspect of government regulation of banking activity emphasizes encouraging the availability of credit to lower-income and minority borrowers and neighborhoods. This policy is implemented in two ways. First, regulators periodically review the record of banking institutions in meeting their CRA and fair lending obligations. Second, CRA performance is also considered as part of the review of applications for mergers and acquisitions involving banking institutions. All banking institutions are likely to be concerned about their periodic CRA evaluations. Institutions actively engaged in consolidation activity may be particularly concerned because of the role such evaluations play in the merger and acquisition approval process. In considering applications for mergers and acquisitions, regulators review the results of CRA compliance examinations, material submitted by the applicant Applicant is a sketch written by Harold Pinter. It was originally written in 1959 and was first broadcast on BBC Radio 3 in 1964. Plot Applying for a job, a young man named Mr. , and comments from the public on the institution's performance. Poor CRA performance records may result in the denial denial, in psychology, an ego defense mechanism that operates unconsciously to resolve emotional conflict, and to allay anxiety by refusing to perceive the more unpleasant aspects of external reality. of an application or delay of approval until the institution can demonstrate a record of satisfactory performance.(16) It should be noted that home mortgage lending is only one of many activities that are considered when evaluating CRA performance. It is possible for an institution to earn a good CRA rating and make no mortgage loans. Institutions with poor CRA track records are more likely to encounter broad-based broad-based Of or relating to an index or average that provides a good representation of the overall market. The S&P 500 and NYSE Composite are generally regarded as broad-based stock indexes, while the popular Dow Jones Industrial Average is biased substantive Substantive may refer to: In grammar:
Thus, for institutions active in mergers and acquisitions, the CRA provides incentives to maintain an aggressive program of lending to lower-income borrowers and neighborhoods. The incentives created by the CRA may contribute to a positive association between consolidation activity and lending to lower-income borrowers or to lower-income neighborhoods. By statute statute, in law, a formal, written enactment by the authorized powers of a state. The term is usually not applied to a written constitution but is restricted to the enactments of a legislature. , regulators must also consider the competitive implications of proposed mergers and acquisitions along with their potential effects on the "convenience and needs" of the communities involved. Proposed consolidations that may have a substantial adverse effect on competition in a market generally are not approved unless there are countervailing convenience and needs considerations (such as the acquisition of a failing bank by a healthy institution). Often, proposed mergers or acquisitions that initially raise serious anticompetitive issues are approved only after the parties agree to sell (divest To deprive or take away. Divest is usually used in reference to the relinquishment of authority, power, property, or title. If, for example, an individual is disinherited, he or she is divested of the right to inherit money. ) banking offices with deposits and assets to limit their increase in market share. Thus, regulatory review of proposed mergers and acquisitions mitigates the possibility that consolidation may adversely affect competition and credit availability in the local community. Consolidations Involving Savings Associations Many of the recent consolidations in banking have involved the acquisition of savings associations by commercial banks, a development that may affect home purchase lending. Savings associations are encouraged, through tax provisions and other incentives, to hold the majority of their assets in home mortgages and also face restrictions on the amount of commercial lending they are permitted. Because commercial banks do not have similar incentives to extend mortgages and are not similarly restricted in their non-mortgage lending, the share of total assets devoted to mortgages may decline in the wake of commercial bank acquisitions of savings associations. CONSOLIDATION AND MARKET-LEVEL CHANGES IN MORTGAGE LENDING Given the variety of possible theoretical effects of consolidation on lending to lower-income and minority borrowers and neighborhoods, empirical em·pir·i·cal adj. 1. Relying on or derived from observation or experiment. 2. Verifiable or provable by means of observation or experiment. 3. analysis can help provide a greater understanding of this issue. We use a specially constructed database that combines information on mergers, acquisitions, and failures of banking institutions with data on the location of banking offices, neighborhood economic and demographic characteristics, and home purchase lending activity in metropolitan areas. (See the appendix appendix, small, worm-shaped blind tube, about 3 in. (7.6 cm) long and 1-4 in. to 1 in. (.64–2.54 cm) thick, projecting from the cecum (part of the large intestine) on the right side of the lower abdominal cavity. for more details on the construction of the database.) The analysis of these data provides information on trends in lending patterns in geographic areas with varying levels of consolidation activity. This information allows us to assess the degree to which consolidation is associated with changes in home purchase lending overall, as well as to lower-income and minority borrowers and neighborhoods. Analytic an·a·lyt·ic or an·a·lyt·i·cal adj. 1. Of or relating to analysis or analytics. 2. Expert in or using analysis, especially one who thinks in a logical manner. 3. Psychoanalytic. Framework The unit of analysis for this research is the county. The county represents a compromise between the MSA (Metropolitan Service Area) An urban area with at least 50,000 people plus surrounding counties. There are 306 MSAs and 428 RSAs (rural service areas) in the U.S. MSAs and RSAs are used to allocate cellular licenses. and smaller geographic units, such as a ZIP code zip code System of postal-zone codes (zip stands for “zone improvement plan”) introduced in the U.S. in 1963 to improve mail delivery and exploit electronic reading and sorting capabilities. or census tract A census tract, census area, or census district is a particular community defined for the purpose of taking a census. Usually these coincide with the limits of cities, towns or other administrative areas and several tracts commonly exist within a county. . On the one hand, for some small banking organizations, the CRA service area may be smaller than a county. In addition, for some consolidations a focus of concern may be the effects on an area smaller than a county. On the other hand, for large organizations CRA evaluations may be based on their lending throughout an entire MSA. It should be noted that more than half of the MSAs in the United States are made up of only one county, and thus for these MSAs, the distinction between the county and the MSA makes no difference. In a given county, we count the number of home purchase loans extended overall and those extended to lower-income and minority borrowers and neighborhoods by all lenders. We compare counties that had high levels of consolidation activity with those that had little or no consolidation activity. Data limitations force us to restrict the analysis to lending in counties in metropolitan areas (see the appendix). The analysis focuses on trends in home purchase lending during two periods, 1993-95 and 1995-97. We use three-year study periods because it may take some time for the effects of a consolidation to influence home purchase lending. For example, the integration of mortgage lending operations, including the retraining re·train tr. & intr.v. re·trained, re·train·ing, re·trains To train or undergo training again. re·train of staff and coordination coordination /co·or·di·na·tion/ (ko-or?di-na´shun) the harmonious functioning of interrelated organs and parts. co·or·di·na·tion n. 1. The harmonious adjustment or interaction of parts. of mortgage underwriting An Introduction to Mortgage Underwriting Underwriting is the process a lender uses to determine if the risk of lending to a particular borrower under certain parameters is acceptable. activities, may require considerable effort and time. Too long a study period, however, makes it difficult to separate the effects of consolidation from other factors that may influence home purchase lending. Three-year study periods seem a reasonable compromise between these two concerns. Further, two periods are used because significant variation occurred in the overall patterns of home purchase lending between 1993-95 and 1995-97. Comparing and contrasting the observed ob·serve v. ob·served, ob·serv·ing, ob·serves v.tr. 1. To be or become aware of, especially through careful and directed attention; notice. 2. relationships in the two periods allow us to draw more definitive conclusions about how consolidation influences home purchase lending patterns. Consolidations are defined at the level of the banking organization. Both institutional mergers and holding company acquisitions are treated as consolidations. Mergers among subsidiaries of the same holding company, however, are not considered consolidations. All structural changes involving a banking organization over each three-year period are treated as a single consolidation. Thus, a consolidation might involve multiple mergers and acquisitions (see the appendix). To count as a consolidation in a given county, the consolidation must have involved the acquisition of a banking institution operating banking offices in that county. Counties in which only the acquiring institution operated banking offices are not considered to have had consolidations. Counties are categorized cat·e·go·rize tr.v. cat·e·go·rized, cat·e·go·riz·ing, cat·e·go·riz·es To put into a category or categories; classify. cat by their level of consolidation activity. To determine this level, we calculate the proportion of all home purchase loans in a county in the first year of each study period that was originated by banking organizations with a consolidation in the county. Counties are grouped by this proportion into three categories: (1) counties in which no organizations were involved in a consolidation; (2) counties in which the proportion of loans extended by organizations involved in consolidation was less than or equal to the median share of loans extended by organizations involved in consolidation for that period (counties with low consolidation activity); and (3) counties in which the proportion of loans extended by organizations involved in consolidation was greater than the median share of loans extended by organizations involved in consolidation for that period (counties with high consolidation activity). For the latter two groups, the median share is calculated using only those counties that had consolidations. Counties are further divided along a number of other dimensions Other Dimensions is a collection of stories by author Clark Ashton Smith. It was released in 1970 and was the author's sixth collection of stories published by Arkham House. It was released in an edition of 3,144 copies. . To differentiate differentiate /dif·fer·en·ti·ate/ (dif?er-en´she-at) 1. to distinguish, on the basis of differences. 2. to develop specialized form, character, or function differing from that surrounding it or from the original. the effects of consolidation in markets of different sizes and growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. , counties are grouped by the number of residents in the county as of 1995 and by the change in their populations over the 1993-95 period. In addition, because market structure may influence lending strategies, counties are grouped according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the market concentration in the MSA in which the county is located, which was measured by a Herfindahl--Hirschman index (HHI HHI Herfindahl-Hirschman Index (measure of market concentration) HHI Heinrich Hertz Institut (Germany) HHI Hilton Head Island HHI Household Income HHI Hyundai Heavy Industries Co, Ltd ) based on banking deposits in the MSA.(18) A threshold The point at which a signal (voltage, current, etc.) is perceived as valid. HHI value of 1800 is used because regulators consider a post-consolidation HHI value of more than 1800 as one signal that the consolidation may have anticompetitive effects in the market. General Patterns of Home Purchase Lending Over the 1993-97 period, home purchase lending in metropolitan areas expanded robustly, as a strong economy and job market and relatively low interest rates encouraged additional home buying (table 1). Although lower-income and minority borrowers and neighborhoods accounted for a moderate proportion of home purchase loans each year, the amount of lending to such groups increased at a faster rate than that to other groups.(19) For example, over 1993-97, lending to lower-income borrowers increased about 31 percent (measured by the change in the number of loans), while lending to higher-income borrowers (those with incomes greater than 120 percent of the median family income of the MSA where they purchased a home) rose 18 percent (table 2, memo item). Similarly, lending to minority borrowers increased about 53 percent, while lending to nonminority borrowers increased 13 percent. 1. Distribution of home purchase loans, by characteristic of borrower and neighborhood, 1993-97
1993
Borrower or census
tract characteristic Number Percent
BORROWER
Racial or ethnic group(1)
Minority 380,002 16.1
Nonminority 1,974,386 83.9
Total 2,354,388 100.0
Income
(percentage of MSA median)(2)
Less than 50 156,639 6.6
50-79 488,486 20.5
80-119 722,877 30.3
120 or more 1,020,915 42.7
Total 2,388,917 100.0
NEIGHBORHOOD
(CENSUS TRACT)
Racial or ethnic composition
(minorities ax a percentage
of population)(3)
Less than 5 772,595 31.8
5-9 . 530,333 21.9
10-19 526,196 21.7
20-49 414,706 17.1
50 or more 183,119 7.5
Total 2,426,949 100.0
Income (median family)
(percentage of MSA median)
Less than 50 26,689 1.1
50-79 227,706 9.4
80-119 1,202,522 49.5
120 or more 970,032 40.0
Total 2,426,949 100.0
All 2,430,844
1994
Borrower or census
tract characteristic Number Percent
BORROWER
Racial or ethnic group(1)
Minority 483,781 19.0
Nonminority 2,065,434 81.0
Total 2,549,215 100.0
Income
(percentage of MSA median)(2)
Less than 50 190,523 7.4
50-79 532,891 20.6
80-119 773,162 30.0
120 or more 1,084,337 42.0
Total 2,580,913 100.0
NEIGHBORHOOD
(CENSUS TRACT)
Racial or ethnic composition
(minorities ax a percentage
of population)(3)
Less than 5 801,662 30.8
5-9 . 556,054 21.3
10-19 572,154 21.9
20-49 463,051 17.8
50 or more 213,886 8.2
Total 2,606,807 100.0
Income (median family)
(percentage of MSA median)
Less than 50 30,592 1.1
50-79 255,575 9.8
80-119 1,301,267 49.9
120 or more 1,010,373 39.1
Total 2,606,807 100.0
All 2,609,469
1995
Borrower or census
tract characteristic Number Percent
BORROWER
Racial or ethnic group(1)
Minority 495,815 20.3
Nonminority 1,950,183 79.7
Total 2,445,998 100.0
Income
(percentage of MSA median)(2)
Less than 50 159,126 6.4
50-79 516,317 20.8
80-119 744,231 30.0
120 or more 1,058,458 42.7
Total 2,478,132 100.0
NEIGHBORHOOD
(CENSUS TRACT)
Racial or ethnic composition
(minorities ax a percentage
of population)(3)
Less than 5 775,968 30.9
5-9 . 528,118 21.0
10-19 547,444 21.8
20-49 447,381 17.8
50 or more 214,635 8.5
Total 2,513,546 100.0
Income (median family)
(percentage of MSA median)
Less than 50 32,179 1.3
50-79 266,002 106.0
80-119 1,279,304 50.9
120 or more 936,061 37.2
Total 2,513,546 100.0
All 2,515,906
1996
Borrower or census
tract characteristic Number Percent
BORROWER
Racial or ethnic group(1)
Minority 556,229 20.0
Nonminority 2,231,494 80.0
Total 2,787,723 100.0
Income
(percentage of MSA median)(2)
Less than 50 200,401 7.1
50-79 608,596 21.5
80-119 838,997 29.7
120 or more 1,178,732 41.7
Total 2,826,726 100.0
NEIGHBORHOOD
(CENSUS TRACT)
Racial or ethnic composition
(minorities ax a percentage
of population)(3)
Less than 5 885,891 30.8
5-9 . 609,897 21.2
10-19 635,674 22.1
20-49 515,328 17.9
50 or more 233,508 8.1
Total 8,801,298 100.0
Income (median family)
(percentage of MSA median)
Less than 50 35,777 1.2
50-79 294,069 10.2
80-119 1,455,975 50.5
120 or more 1,094,477 40.0
Total 2,880,298 100.0
All 2,882,921
1997
Borrower or census
tract characteristic Number Percent
BORROWER
Racial or ethnic group(1)
Minority 582,816 20.7
Nonminority 2,234,608 79.3
Total 2,817,424 100.0
Income
(percentage of MSA median)(2)
Less than 50 213,763 7.4
50-79 629,636 21.8
80-119 836,960 29.0
120 or more 1,205,063 41.8
Total 2,885,422 100.0
NEIGHBORHOOD
(CENSUS TRACT)
Racial or ethnic composition
(minorities ax a percentage
of population)(3)
Less than 5 877,244 29.8
5-9 . 625,635 21.2
10-19 661,654 22.4
20-49 536,525 18.2
50 or more 247,469 8.4
Total 2,948,527 100.0
Income (median family)
(percentage of MSA median)
Less than 50 38,034 1.3
50-79 301,398 10.2
80-119 1,476,450 50.1
120 or more 1,132,645 38.4
Total 2,948,527 100.0
All 2,951,583
NOTE. Includes only owner-occupied adj. 1. lived in by the owner; - of dwellings. Adj. 1. owner-occupied - lived in by the owner; "one owner-occupied and three rental apartments" inhabited - having inhabitants; lived in; "the inhabited regions of the earth" one- to four-family home purchase loans extended for properties in metropolitan statistical areas (MSAs). The counties included are those that were MSAs throughout the period. Thus, loan counts will differ from figures published by the Federal Financial Institutions Examination Council The Federal Financial Institutions Examination Council, or FFIEC, is a formal interagency body of the United States government empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions by the Board of (FFIEC FFIEC Federal Financial Institutions Examination Council ). Totals fro the four borrower and neighborhood categories differ because information regarding borrower race or ethnic status and income or property location was not reported for all loans. (1.) Loans to black, Asian, Hispanic Hispanic Multiculture A person of Mexican, Puerto Rican, Cuban, Central or South American, or other Spanish culture or origin, regardless of race Social medicine Any of 17 major Latino subcultures, concentrated in California, Texas, Chicago, Miam, NY, and elsewhere , Native American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of and "other race" borrowers are classified as minority loans. (2.) MSA median family income is estimated for each year by the Department of Housing and Urban Development. (3.) Median family income and racial composition are derived de·rive v. de·rived, de·riv·ing, de·rives v.tr. 1. To obtain or receive from a source. 2. from the 1990 Census census, periodic official count of the number of persons and their condition and of the resources of a country. In ancient times, among the Jews and Romans, such enumeration was mainly for taxation and conscription purposes. of Population and Housing. 2 Change in home purchase lending, by characteristic of borrower and neighborhood, 1993 97
Percent
1993 1994 1995 1996 Memo
Borrower or census to to to to 1993-97
tract characteristic 1994 1995 1996 1997
BORROWER
Racial or ethnic
group(1)
Minority 27.3 2.5 12.2 4.8 53.4
Nonminority 4.6 -5.6 14.4 .1 13.2
Total 8.3 -4.0 14.0 1.1 19.7
Income
(percentage of MSA
median)(2)
Less than 50 21.6 -16.5 25.9 6.7 36.5
50-79 91.0 -3.1 17.9 3.5 28.9
80-119 7.0 -3.7 12.7 -.2 15.8
120 or more 6.2 -2.4 11.4 2.2 18.0
Total 80.0 -4.0 14.1 2.1 20.8
NEIGHBORHOOD
(CENSUS TRACT)
Racial or ethnic
composition
(minorities as a
percentage of
population)(3)
Less than 5 3.8 -3.2 14.2 -1.0 13.5
5-9 4.8 -5.0 15.5 2.6 18.0
10-19 8.7 -4.3 16.1 4.1 25.7
20-49 11.7 -3.4 15.2 4.1 29.4
50 or more 16.8 .4 8.8 6.0 35.1
Total 7.4 -3.6 14.6 2.4 21.5
Income (median family)
(percentage of MSA
median)(3)
Less than 50 14.6 5.2 11.2 6.3 42.5
50-79 12.2 4.1 10.6 2.5 32.4
80-119 8.2 -1.7 13.8 1.4 22.8
120 or more 5.1 -8.2 16.9 3.5 16.8
Total 7.4 -3.6 14.6 2.4 21.5
All 7.3 -3.6 14.6 2.4 21.4
NOTE. Includes only owner-occupied one- to four-family home purchase loans extended for properties in MSAs. The counties included are those that were in MSAs throughout the period. Thus, loan counts will differ from figures published by the FFIEC. Totals for the four borrower and neighborhood categories differ because information regarding borrower race or ethnic status and income or properly location was not reported for all loans. (1.) Loans to black, Asian, Hispanic, Native American and "other race" borrowers are classified as minority loans. (2.) MSA median family income is estimated for each year by the Department of Housing and Urban Development. (3.) Median family income and racial composition are derived from the 1990 Census of Population and Housing. The substantial growth in lending to lower-income and minority borrowers and neighborhoods in recent years is the consequence of many factors. Besides the bolstering of demand by the strong economy and job market, relatively low interest rates on home loans and relatively modest changes in home prices have combined to improve the affordability of homebuying. Moreover, since the early 1990s, originators of conventional home purchase loans have initiated a wide variety of affordable home purchase lending programs intended to benefit lower-income and minority borrowers and neighborhoods.(20) Significant changes in government-backed lending programs in recent years have also improved opportunities for lower-income borrowers. For example, the Federal Housing Administration Federal Housing Administration (FHA) Federally sponsored agency chartered in 1934 whose stock is currently owned by savings institutions across the United States. The agency buys residential mortgages that meet certain requirements, sells these mortgages in packages, and insures (FHA See Federal Housing Administration. FHA See Federal Housing Administration (FHA). ) has reduced the up-front up-front or up·front Informal adj. 1. Straightforward; frank. 2. Paid or due in advance: up-front cash. adv. mortgage insurance premium for FHA-insured loans, raised the maximum loan amount eligible for FHA backing, and increased underwriting flexibility. The Effects of Consolidation To analyze an·a·lyze v. 1. To examine methodically by separating into parts and studying their interrelations. 2. To separate a chemical substance into its constituent elements to determine their nature or proportions. 3. the effects of consolidation activity on home purchase lending patterns, we track changes in the number of home purchase loans originated in counties sorted by their degree of consolidation activity for each of the two study periods. In each period nearly all home purchase loans were extended in counties that had some consolidation activity (table 3). Only about 5 percent of loans were originated in MSA counties with no consolidation activity during the two study periods. Loan volumes were similar in counties with low levels of consolidation activity and in those with high levels. Because nearly all home purchase loans in MSAs were originated in counties with some level of consolidation, the most useful comparison is between counties with relatively low levels of consolidation activity and those with relatively high levels. The noteworthy relationships between consolidation and changes in lending are those that are consistent across time periods and robust when controls for other factors are considered. We use multivariate The use of multiple variables in a forecasting model. regressions to help identify such relationships, although these regressions are not shown in this article. 3. Home purchase loans, by level of consolidation activity in a county, county characteristic, and market concentration level, 1993-95 and 1995-97
Level of
consolidation
activity All borrowers
by county
characteristic 1993-95 1995-97
and market
concentration Initial Percentage Initial Percentage
level number change number change
LEVEL OF
CONSOLIDATION
ACTIVITY(2)
Overall 2,430,844 3 2,515,906 17
None 116,023 15 155,886 10
Low 1,120,439 4 1,030,464 17
High 1,194,382 2 1,329,465 19
By county size(3)
500,000 or less 1,200,576 3 1,243,745 14
None 108,945 14 145,480 11
Low 526,331 5 587,619 15
High 569,300 0 510,646 13
More than
500,000 1,226,268 4 1,272,161 21
None 7,078 16 10,506 0
Low 594,108 3 442,845 19
High 625,082 5 818,810 22
By county
growth rate(4)
Low growth 1,287,804 2 1,314,868 16
None 55,055 10 89,039 7
Low 529,018 2 402,281 15
High 703,731 2 823,548 17
High growth 1,143,040 5 1,201,038 19
None 6,098 19 66,947 15
Low 591,421 5 628,183 18
High 490,651 3 505,908 21
By market
concentration(5)
Less than 1800 2,122,710 4 2,166,613 18
None 93,065 16 109,407 12
Low 1,028,222 3 845,191 17
High 1,001,423 3 1,212,015 20
1800 and more 308,134 2 349,293 12
None 22,958 8 46,579 7
Low 92,217 5 185,273 16
High 192,959 1 117,441 8
Level of Type of borrower(1)
consolidation
activity Minority
by county
characteristic 1993-95 1995-97
and market
concentration Initial Percentage Initial Percentage
level number change number change
LEVEL OF
CONSOLIDATION
ACTIVITY(2)
Overall 380,002 30 495,815 18
None 9,744 44 15,203 3
Low 193,798 27 172,853 18
High 176,460 33 307,759 18
By county size(3)
500,000 or less 111,916 35 150,557 16
None 8,854 43 10,088 12
Low 55,682 33 74,501 17
High 47,380 34 65,968 15
More than
500,000 268,086 29 345,258 18
None 890 57 5,115 -16
Low 138,116 25 98,352 18
High 129,080 33 241,791 19
By county
growth rate(4)
Low growth 226,156 26 285,737 14
None 5,377 39 11,474 -3
Low 107,442 22 74,072 13
High 113,337 29 200,191 15
High growth 153,846 37 210,078 22
None 4,307 51 3,729 19
Low 86,356 33 98,781 21
High 63,123 40 107,568 24
By market
concentration(5)
Less than 1800 344,785 30 445,233 18
None 7,851 46 7,631 11
Low 179,838 28 143,724 17
High 157,096 32 293,878 19
1800 and more 35,217 31 50,582 13
None 1,893 36 7,572 -6
Low 13,960 16 29,129 20
High 19,364 42 13,881 8
Level of Type of borrower(1)
consolidation
activity Lower-income
by county
characteristic 1993-95 1995-97
and market
concentration Initial Percentage Initial Percentage
level number change number change
LEVEL OF
CONSOLIDATION
ACTIVITY(2)
Overall 645,125 5 675,443 25
None 33,425 16 44,909 21
Low 285,155 5 285,285 25
High 326,545 3 345,249 25
By county size(3)
500,000 or less 334,858 3 343,915 23
None 31,381 16 42,446 21
Low 140,076 3 162,441 25
High 163,401 0 139,028 22
More than
500,000 310,267 7 331,528 27
None 2,004 19 2,463 22
Low 145,079 7 122,844 26
High 163,144 7 206,221 27
By county
growth rate(4)
Low growth 350,217 5 366,449 21
None 15,605 13 25,857 18
Low 135,730 5 121,810 21
High 198,882 4 218,782 22
High growth 294,908 5 308,994 29
None 17,820 19 19,052 25
Low 149,425 5 163,475 29
High 127,663 2 126,467 31
By market
concentration(5)
Less than 1800 552,825 5 579,286 25
None 27,276 17 32,584 23
Low 260,159 5 234,545 25
High 265,390 5 312,157 26
1800 and more 92,300 1 96,157 23
None 6,149 12 12,325 17
Low 24,996 5 50,740 27
High 61,155 -2 33,092 19
Level of Type of neighborhood(1)
consolidation
activity Minority
by county
characteristic 1993-95 1995-97
and market
concentration Initial Percentage Initial Percentage
level number change number change
LEVEL OF
CONSOLIDATION
ACTIVITY(2)
Overall 597,825 11 662,016 18
None 19,014 23 22,629 5
Low 335,192 7 247,737 15
High 243,619 15 391,650 21
By county size(3)
500,000 or less 185,540 12 207,501 12
None 18,175 22 16,112 11
Low 104,422 9 112,192 13
High 62,943 13 79,197 10
More than
500,000 412,285 10 454,515 22
None 839 33 6,517 -10
Low 230,770 6 135,545 18
High 180,676 16 312,453 24
By county
growth rate(4)
Low growth 335,403 9 366,124 18
None 9,172 25 17,527 2
Low 177,090 5 99,726 13
High 149,141 13 248,871 22
High growth 262,422 13 295,892 19
None 7,842 21 5,102 15
Low 158,102 9 148,011 17
High 94,478 19 142,779 20
By market
concentration(5)
Less than 1800 540,007 10 91,086 19
None 15,474 22 11,137 11
Low 312,379 7 03,546 15
High 212,154 14 76,403 22
1800 and more 57,818 15 70,930 11
None 3,540 27 11,492 -1
Low 22,813 3 44,191 16
High 31,465 23 15,247 4
Level of Type of neighborhood(1)
consolidation
activity Lower-income
by county
characteristic 1993-95 1995-97
and market
concentration Initial Percentage Initial Percentage
level number change number change
LEVEL OF
CONSOLIDATION
ACTIVITY(2)
Overall 254,395 17 298,181 14
None 11,635 30 18,017 7
Low 115,026 12 116,831 13
High 127,734 21 163,333 15
By county size(3)
500,000 or less 114,231 15 131,010 10
None 10,944 30 16,402 9
Low 47,164 12 61,840 11
High 56,123 14 52,768 8
More than
500,000 140,164 19 167,171 17
None 691 35 1,615 -14
Low 67,862 12 54,991 15
High 71,611 26 110,565 19
By county
growth rate(4)
Low growth 154,804 17 181,657 12
None 5,482 26 11,617 -1
Low 61,569 13 54,931 10
High 87,753 19 115,109 14
High growth 99,591 17 116,524 17
None 6,153 33 6,400 22
Low 53,457 11 61,900 15
High 39,981 23 48,224 20
By market
concentration(5)
Less than 1800 225,264 17 259,284 14
None 9,861 31 12,571 12
Low 106,089 11 95,015 11
High 109,314 20 151,698 16
1800 and more 29,131 22 38,897 10
None 1,774 26 5,446 -2
Low 8,937 22 21,816 18
High 18,420 22 11,635 2
(1.) Loans for which the borrowers' income was below 80 percent of the current year median family income of their MSA were classified as loans to lower-income borrowers. Loans to black, Asian, Hispanic, Native American, and "other race" borrowers were classified as loans to minorities. Information on the census tract location of the property being purchases was used to determine which loans were originated in lower-income or minority neighborhoods. Loans for properties in census tracts whose 1990 median family income was less than 80 percent of the 1990 median income of their MSA were classified as loans to lower-income neighborhoods. Similarly, loans for properties in census tracts with more than 20 percent minority residents in 1990 were classified as loans to minority neighborhoods. (2.) The three categories of consolidation are defined as the following: None--counties in which no organizations were involved in a consolidation; low--counties in which the share of loans extended by organization involved in consolidations was less than or equal to the median share of loans extended in all counties by organizations involved in consolidations for that period; and high--counties in which the share of loans extended in all counties by organizations involved in consolidations for that period. (3.) Population. (4.) Counties with low growth rates are those where the 1993-95 growth in population was less than the median for all counties in the study. Counties with high growth rates are those where the growth in population was equal to or greater than the median. (5.) Herfindahl-Hirschman index (HHI) level based on deposits at the beginning of each period. Percentage changes in the number of home purchase loans extended in a county are not significantly different in areas with high and those with low consolidation activity for both overall lending and across the four borrower and neighborhood lending categories (table 3). There are only minor exceptions to this result. In particular, for the 1993-95 period smaller counties with high levels of consolidation have a lower growth rate of home purchase loans--both overall and for lower-income applicants--than smaller counties with low levels of consolidation activity. Although growth rates do not generally differ by the level of consolidation activity in a county, they do differ between periods and across the lending categories. For example, the growth in the number of loans to minority borrowers is generally greater than the growth in the number of loans to lower-income borrowers. However, within any given borrower or neighborhood category, there is little difference in the loan growth rate between counties with low consolidation activity and those with high consolidation activity. This result also holds when counties are grouped by population, population growth rate, and market concentration. The failure to find a consistent and robust relationship between the level of banking consolidation and changes in home purchase lending has two possible explanations. Consolidating organizations may not change their home purchase lending behavior. Alternatively, any changes in home purchase lending activity by consolidating organizations may be offset by other market participants. Home purchase lending is an intensely competitive business.(21) Entry by firms is relatively easy, a typical market has many lenders, and a mature secondary market allows institutions to readily sell loans they originate o·rig·i·nate v. 1. To bring into being; create. 2. To come into being; start. and to extend additional credit. The analysis presented here does not provide a complete picture of the effect of consolidation on home purchase lending. For example, it does not identify changes in prices or product offerings. Further, it does not provide information about the behavior of any individual lender or lender type. However, the results strongly suggest that over the entire study period the level of consolidation activity among banking organizations in a county had little effect on the growth of total home purchase lending or on the growth of lending to any of the four borrower and neighborhood categories. CONSOLIDATION AND MORTGAGE LENDING AT THE BANKING ORGANIZATION LEVEL The results presented in the last section showed little relationship between consolidation activity and changes in home purchase lending in a county. The two potential explanations offered characterized char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. changes in the behavior of consolidating organizations differently. In this section, we focus on these differences by examining changes in the behavior of consolidating banking organizations. Because the CRA mandates mandates, system of trusteeships established by Article 22 of the Covenant of the League of Nations for the administration of former Turkish territories and of former German colonies. a special responsibility for banking organizations to serve the credit needs of residents of those areas where they operate banking offices, we distinguish between changes in their behavior in counties where they had banking offices before the consolidation and changes in their behavior in counties where they did not. Many banking organizations do considerable lending in areas where they do not have banking offices, often through affiliated af·fil·i·ate v. af·fil·i·at·ed, af·fil·i·at·ing, af·fil·i·ates v.tr. 1. To adopt or accept as a member, subordinate associate, or branch: mortgage and finance companies. In addition, institutions that are not affiliated with banking organizations and are not subject to the CRA--such as credit unions and mortgage and finance companies--extend many home purchase loans. Indeed, loans made by banking organizations in counties in which they had banking offices accounted for only 38 percent of overall home purchase lending in 1993 (derived from table 4). 4. Home purchase loans, by type and location of organization and by characteristic of borrower and neighborhood, 1993-97
Type of borrower(1)
Type and location All
of organization
Initial Percentage
number change
Banking organizations 1,459,878 31
In counties with
branch offices(2) 925,236 8
In other counties 534,642 69
Other institutions(3) 970,966 8
All lenders 2,430,844 21
Type of borrower(1)
Type and location Minority Lower-income
of organization
Initial Percentage Initial Percentage
number change number change
Banking organizations 208,178 63 402,724 27
In counties with
branch offices(2) 131,739 29 259,676 4
In other counties 76,439 122 143,048 68
Other institutions(3) 171,824 42 242,401 37
All lenders 380,002 53 645,125 31
Type of neighborhood(1)
Type and location Minority Lower-income
of organization
Initial Percentage Initial Percentage
number change number change
Banking organizations 315,803 40 151,768 32
In counties with
branch offices(2) 193,251 15 104,356 4
In other counties 122,552 79 47,322 93
Other institutions(3) 282,022 21 102,717 36
All lenders 597,825 31 254,395 33
NOTE. Includes only owner-occupied one- to four-family home purchase loans extended in MASs. (1.) See note 1 to table 3. (2.) Category includes loans by all commercial banks, savings associations, and their mortgage and finance company affiliates. Banking organization are considered to have branch office in a county only where the commercial bank or savings association component of the organization has a branch office in that county. (3.) Category includes independent mortgage and finance companies and credit unions. The pattern of lending by banking organizations in counties where they operated banking offices is different from that of banking organizations in areas where they did not operate banking offices and from that of lending by other institutions (table 4). For example, over the 1993-97 period, banking organizations increased their overall lending 69 percent in areas where they did not have banking offices at the beginning of the period but only 8 percent in those counties where they did operate banking offices. There are similar differences in growth rates for the four borrower and neighborhood lending categories. Measuring the Effects of Consolidation The unit of observation in measuring the effects of consolidation in the analysis in this section is the banking organization-county combination. Each banking organization is linked with each county in every metropolitan area--a total of 726 counties. Thus, each banking organization potentially has 726 distinct observations. However, a banking organization-county combination is included in the sample only if the organization had a CRA obligation in the county. Such an obligation is considered to exist if any banking-institution component (commercial bank or savings association) of a banking organization operated a banking office in the county at the beginning of the study period. A single organization may appear in the sample several times if it had offices in more than one county, as was true in 1993, for instance, for nearly 30 percent of the banking organizations (appendix table A. 1). The sample was further, restricted to include only those combinations in which the organization extended ten loans or more in the county in the first year of the analytical analytical, analytic pertaining to or emanating from analysis. analytical control control of confounding by analysis of the results of a trial or test. period.(22) To assess the effects of consolidation on home purchase lending by banking organizations, we compare the behavior of organizations that were involved in consolidation in a county with that of organizations that were not. As before, an organization is considered to have undergone a consolidation in a county only if a banking-institution component of the organization that was operating a banking office in the county was acquired during the study period. Those combinations involved in consolidation are further subdivided according to the type of consolidation. These decompositions allow for an assessment of whether and how consolidation in banking has been associated with changes in overall lending and lending to lower-income and minority borrowers and neighborhoods. Because economic theory suggests that the geographic proximity PROXIMITY. Kindred between two persons. Dig. 38, 16, 8. of the acquiring and acquired organizations may influence subsequent lending patterns, we divide organization-county combinations involved in consolidation into three types according to the location of the offices of the acquiring component: (1) consolidations in which the acquiring as well as the acquired components of the organizations operated offices in the county (within-county consolidations), (2) consolidations in which the acquiring component operated an office in the MSA containing the county but not in the county (within-MSA-not-in-county consolidations), and (3) consolidations in which the acquiring component did not operate offices in either the county or its MSA (out-of-MSA consolidations). Economic theory further suggests that the size of the organizations involved in a consolidation may affect lending activity. Thus, for the current analysis, we group consolidations according to the size (in assets) of the acquiring and the acquired organization (see the appendix): (1) a small organization (assets of less than $250 million) acquiring another small organization, (2) a medium-sized Me´di`um-sized` a. 1. Having a medium size; as, a medium-sized man s>. Adj. 1. medium-sized - intermediate in size medium-size, moderate-size, moderate-sized organization (assets between $250 million and $10 billion) acquiring a small organization, (3) a medium-sized organization acquiring another medium-sized organization, (4) a large organization (assets greater than $10 billion) acquiring a small organization, (5) a large organization acquiring a medium-sized organization, and (6) a large organization acquiring another large organization. The approach taken here employs performance standards often used in previous research on home mortgage lending issues.(23) They are also used in evaluating the CRA record of banking organizations. These measures are (1) the change in the number of loans an organization makes in a county overall and to lower-income and minority borrowers and neighborhoods, (2) changes in an organization's share of the total number of loans in a county overall and to lower-income and minority borrowers and neighborhoods in each of the organization's local communities (market share), and (3) changes in the share of an organization's own loan activity in a county that is composed of such lending (portfolio share). (See box "Performance Standards Used to Measure the Effects of Consolidation at the Organization Level.") All three measures are based on numbers of loans, although CRA examiners also consider the dollar amount of lending in using these measures. Changes in the lending activity of consolidating organizations are computed by comparing lending by the merged organization at the end of the period with the combined lending activity of the component parts of the merged organization (called a "pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma " organization) at the beginning of the period.(24) Because we want to characterize the behavior of the "typical" banking organization, we focus on median values Noun 1. median value - the value below which 50% of the cases fall median statistics - a branch of applied mathematics concerned with the collection and interpretation of quantitative data and the use of probability theory to estimate population in the market share and portfolio share analyses. The median is preferred because the mean may be greatly influenced by extreme values, either positive or negative. Median values are sensitive, however, to the number of banking organization-county combinations that had no lending in a particular borrower or neighborhood category over the analytical period. For some categories, the number of such combinations is relatively large, which can give a misleading indication of the effects of consolidation on organizations active in certain types of lending (table 5).(25) Thus, in calculating median values, we exclude all cases in which a banking organization extended no loans in a particular borrower or neighborhood category in a county. For example, if a bank extended no loans to lower income applicants over 1993-95, it is not considered in calculating the median change in market share of lending to lower-income borrowers during that period (that is, it is not considered to have had a 0 percent change in its market share).(26) 5. Percentage of banking organization-county combinations with no lending to minority and lower-income borrowers and neighborhoods, 1993-95 and 1995-97
Type of borrower(1)
Category Minority Lower-income
1993-95 1995-97 1993-95 1995-97
No lending 10.6 9.7 .4 .5
No lending and involved 1.0 .8 .1 .1
in consolidations
Memo
Number of banking
organization-county
combinations 7,143 7,100 7,143 7,100
Type of neighborhood(1)
Category Minority Lower-income
1993-95 1995-97 1993-05 1995-97
No lending 27.1 27.5 14.8 14.8
No lending and involved 4.2 3 3.4 2.1
in consolidations
Memo
Number of banking
organization-county
combinations 7,143 7,100 7,143 7,100
(1.) See note 1 to table 3. It is important to emphasize that the patterns found in this analysis may differ from those in the previous section. In this analysis, we track changes in home purchase lending for banking organizations only in the counties in which they operated offices at the beginning of each analytical period. These changes do not necessarily reflect total changes in an organization's lending, as an organization may have expanded both its CRA obligations and its lending into new markets over time. As with the preceding analysis, the discussion emphasizes only those relationships that are robust after considering other factors that may have influenced home purchase lending patterns. Consolidation and Lending by Banking Organizations in Counties Where They Operate Offices A simple count of the number of banking organization-county combinations involved in consolidation provides a perspective on the extent of consolidation in the banking industry over our periods of analysis. Over each time period we analyze, a relatively small percentage of banking organization-county combinations were involved in consolidation--for example, only 18 percent of the organization-county combinations in the sample over the 1995-97 period were involved in a consolidation (table 6). However, these tended to include organizations with relatively large numbers of home purchase loans, as they accounted for almost 30 percent of all lending in counties by banking organizations with CRA obligations in those counties (derived from table 7). 6. Distribution of banking organization-county combinations, by level of consolidation activity and size and location of banking organization, 1993-95 and 1995-97
Consolidation category for
banking organization- 1995-95 1995-97
county combinations
No consolidation 5,850 5,800
By size of banking organization
Small 2,047 1,813
Medium 2,237 2,168
Large 1,566 1,819
Any consolidation 1,293 1,300
By location
Within county 603 608
Within MSA, not in county 125 96
Out of MSA 565 596
By size of banking
organization([dagger])
small acquiring small 78 69
Medium acquiring small 211 184
Medium acquiring medium 300 197
Large acquiring small 71 51
Large acquiring medium 314 318
Large acquiring large 319 481
All banking organization-
county combinations 7,143 7,100
1. Size categories are the following: A small organization has assets of less than $251) million; a medium-sized organization has assets between $250 million and $10 billion; and a large organization has assets of more than $10 billion. (7.) Home purchase loans by banking organization county combinations, by level of consolidation activity and size and location of banking organization. 1993-95 and 1995-97
Consolidation All borrowers
category
for banking
organization- 1993-95 1995-97
county
combinations Initial Percentage Initial Percentage
number change number change
No consolidation 65,366 3 692,296 3
By [size.sup.2]
Small 114,177 -7 90,406 7
Medium 264,289 2 244,983 9
Large 275,199 7 356,907 -2
Any consolidation 278,519 -15 289,948 -13
By location
Within county 182,301 -9 188,107 -8
Within MSA.
not in
county 10,949 -17 8,295 -23
Out of MSA 85,269 -27 93,546 -23
By size(2)
Small
acquiring
small 4,717 -19 5,206 -17
Medium
acquiring
small 24,513 -1 19,983 -7
Medium
acquiring
small 59,931 1 35,870 -17
Large
acquiring
small 22,769 22 14,149 5
Large
acquiring
small 93,172 -27 84,569 -8
Large
acquiring
small 73,417 -29 130,171 -18
Type of borrower(1)
Consolidation
category Minority
for banking
organization- 1993-95 1995-97
county
combinations Initial Percentage Initial Percentage
number change number change
No consolidation 92,229 26 115,623 -2
By [size.sup.2]
Small 12,151 11 11,383 11
Medium 32,038 28 33,624 4
Large 48,110 29 70,616 -8
Any consolidation 39,072 12 58,430 -11
By location
Within county 27,898 15 43,315 -8
Within MSA.
not in
county 926 66 1,358 -34
Out of MSA 10,248 0 13,757 -20
By size(2)
Small
acquiring
small 882 -43 729 -21
Medium
acquiring
small 3,119 31 3,509 -1
Medium
acquiring
small 6,543 20 5,268 -21
Large
acquiring
small 4,770 45 2,442 -3
Large
acquiring
small 14,370 -5 16,873 -6
Large
acquiring
small 9,388 17 29,609 -14
Type of borrower(1)
Consolidation
category Lower-income
for banking
organization- 1993-95 1995-97
county
combinations Initial Percentage Initial Percentage
number change number change
No consolidation 181,881 -2 190,323 1
By [size.sup.2]
Small 30,923 -6 24,961 14
Medium 71,006 -1 62,541 11
Large 79,952 -2 102,821 -9
Any consolidation 78,589 -13 73,963 -6
By location
Within county 50,613 -8 46,706 0
Within MSA.
not in
county 3,591 -8 2,221 -20
Out of MSA 24,285 -24 25,036 -18
By size(2)
Small
acquiring
small 1,215 -20 1,472 -10
Medium
acquiring
small 6,351 7 5,268 6
Medium
acquiring
small 15,092 -1 9,389 -9
Large
acquiring
small 6,549 8 4,424 7
Large
acquiring
small 26,366 -26 22,321 -1
Large
acquiring
small 23,016 -17 31,089 -13
Type of neighborhood(1)
Consolidation
category Minority
for banking
organization- 1993-95 1995-97
county
combinations Initial Percentage Initial Percentage
number change number change
No consolidation 137,940 9 148,093 0
By [size.sup.2]
Small 20,995 -6 16,260 8
Medium 46,076 9 41,892 4
Large 70,869 14 89,941 -3
Any consolidation 54,650 -4 74,072 -9
By location
Within county 36,945 2 54,771 -6
Within MSA.
not in
county 1,220 26 1,766 -27
Out of MSA 16,485 -18 17,535 -16
By size(2)
Small
acquiring
small 1,305 -49 1,237 -35
Medium
acquiring
small 4,307 8 5,373 -10
Medium
acquiring
small 9,840 -3 6,045 -23
Large
acquiring
small 6,994 29 2,845 3
Large
acquiring
small 20,685 -13 20,872 -8
Large
acquiring
small 11,519 -6 37,700 -7
Type of neighborhood(1)
Consolidation
category Low-income
for banking
organization- 1993-95 1995-97
county
combinations Initial Percentage Initial Percentage
number change number change
No consolidation 73,411 9 84,082 -10
By [size.sup.2]
Small 12,985 0 11,237 2
Medium 26,081 14 26,162 -3
Large 34,345 9 46,683 -17
Any consolidation 30,379 0 33,626 -13
By location
Within county 19,902 5 22,961 -8
Within MSA.
not in
county 1,319 20 999 -27
Out of MSA 9,158 -12 9,666 -25
By size(2)
Small
acquiring
small 617 -19 652 -29
Medium
acquiring
small 2,524 10 2,319 -7
Medium
acquiring
small 5,736 2 3,826 -15
Large
acquiring
small 3,149 16 1,903 7
Large
acquiring
small 9,562 -9 8,977 -10
Large
acquiring
small 8,791 1 15,949 -18
(1.) See note 1 no table 3. (2.) See note 1 to table 6. Most banking organization-county combinations involved in consolidation were involved in either within-county consolidations or out-of-MSA consolidations--90 percent over 1993-95 (derived from table 6). In addition, a majority of the banking organization-county combinations involved in mergers involved large acquiring institutions--54 percent over 1993-95 (derived from table 6). These organizations extended mosst of the home purchase loans--about 68 percent over 1993-95--originated by banking organization-county combinations involved in consolidation (derived from table 7). Changes in the Level and Market Share of Home Purchase Lending In stark contrast to the analysis of the effects of consolidation on home purchase lending at the market level, which found no consistent relationships between consolidation and changes in home purchase lending, consolidation does appear to be related to changes in home purchase lending when the effects are examined at the organizational level. Again the focus is on lending by banking organizations in those counties in which they operated banking offices. Banking organization-county combinations that were involved in consolidation consistently showed less growth (or more decline) in the number of home purchase loans they originated than banking organization-county combinations that were not involved in consolidation. Moreover, the growth in home purchase lending by both groups was generally less than the growth in total lending in metropolitan areas. Although the growth rates of total lending for all mortgage lending organizations were 3 percent and 17 percent in 1993-95 and 1995-97 respectively (derived from table 1), the number of loans extended by the banking organization-county combinations in our sample that were involved in consolidation declined about 14 percent in each period while the number of loans extended by those combinations in our sample not involved in consolidation increased 3 percent in both periods (table 7). These relative relationships generally hold for overall lending and for lending to the four borrower and neighborhood categories and in both time periods, although not all differences are statistically significant. The market share of home purchase loans in a county extended by the typical consolidating organization with an office in that county (that is, the median banking organization-county combination involved in a consolidation) declined substantially in both years, and by more than that of the typical non-consolidating organization with an office in that county (table 8). This result indicates that the patterns shown in table 7 are not driven by the behavior of just a few large organizations but rather reflect the experiences of the typical organization. 8. Market share of home purchase lending by banking organization-county combinations, by level of consolidation activity and size and location of banking organization, 1993-95 and 1995-97 Percent
Consolidation All borrowers
category
for banking
organization- 1993-95 1995-97
county
combinations Initial Percentage Initial Percentage
share change share change
No consolidation 2.0 -7 2.2 -13
By size(2)
Small 1.2 -16 1.1 -11
Medium 2.0 -4 1.9 -5
Large 3.0 -1 3.6 -22
Any consolidation 3.5 -24 3.6 -27
By location
Within county 4.4 -17 4.3 -27
Within MSA,
not in
county 2.5 -34 2.8 -36
Out of MSA 3.1 -31 3.1 -28
By size(2)
Small
acquiring
small .7 -21 .9 -33
Medium
acquiring
small 2.1 -15 1.7 -21
Medium
acquiring
small 3.4 -13 3.0 -30
Large
acquiring
small 3.8 -4 2.5 -18
Large
acquiring
small 4.4 -30 5.1 -20
Large
acquiring
small 4.9 -37 4.1 -32
Type of borrower(1)
Consolidation
category Minority
for banking
organization- 1993-95 1995-97
county
combinations Initial Percentage Initial Percentage
share change share change
No consolidation 1.1 -9 1.3 -17
By size(2)
Small .3 -21 .3 -16
Medium 1.2 -3 1.2 -7
Large 2.7 -4 3.3 -26
Any consolidation 2.6 -19 3.0 -30
By location
Within county 3.6 -13 3.8 -28
Within MSA,
not in
county .7 -16 2.0 -48
Out of MSA 2.2 -27 2.6 -30
By size(2)
Small
acquiring
small .2 -24 0.5 -36
Medium
acquiring
small 1.3 -12 .8 -18
Medium
acquiring
small 2.2 -7 2.1 -31
Large
acquiring
small 4.3 -3 1.7 -20
Large
acquiring
small 3.3 -29 4.4 -20
Large
acquiring
small 4.0 -29 4.0 -37
Type of borrower(1)
Consolidation
category Lower-income
for banking
organization- 1993-95 1995-97
county
combinations Initial Percentage Initial Percentage
share change share change
No consolidation 1.9 -13 2.0 -16
By size(2)
Small 1.2 -19 1.1 -12
Medium 1.9 -8 1.7 -9
Large 3.3 -10 3.5 -28
Any consolidation 3.5 -24 3.4 -28
By location
Within county 4.1 -14 4.1 -26
Within MSA,
not in
county 2.9 -33 2.6 -36
Out of MSA 2.9 -32 2.8 -28
By size(2)
Small
acquiring
small .8 -21 .9 -37
Medium
acquiring
small 2.1 -7 1.4 -15
Medium
acquiring
small 3.1 -6 2.6 -28
Large
acquiring
small 4.1 -14 1.9 -25
Large
acquiring
small 4.1 -33 5.0 -19
Large
acquiring
small 4.5 -31 3.9 -34
Type of neighborhood(1)
Consolidation
category Minority
for banking
organization- 1993-95 1995-97
county
combinations Initial Percentage Initial Percentage
share change share change
No consolidation 1.0 -10 1.1 -14
By size(2)
Small 0.3 -21 .3 -14
Medium 1.1 -5 .9 -5
Large 2.5 -4 2.9 -22
Any consolidation 2.1 -20 3.0 -27
By location
Within county 3.1 -11 3.4 -27
Within MSA,
not in
county .7 -15 2.0 -38
Out of MSA 1.9 -29 2.6 -26
By size(2)
Small
acquiring
small .2 -37 0.6 -56
Medium
acquiring
small 1.2 -18 0.9 -19
Medium
acquiring
medium 2.0 -13 1.6 -36
Large
acquiring
small 2.1 1 1.7 -17
Large
acquiring
medium 2.9 -25 4.1 -19
Large
acquiring
large 3.5 -24 3.8 -31
Type of neighborhood(1)
Consolidation
category Lower-income
for banking
organization- 1993-95 1995-97
county
combinations Initial Percentage Initial Percentage
share change share change
No consolidation 1.5 -11 1.5 -17
By size(2)
Small .7 -23 .6 -12
Medium 1.4 -5 1.3 -8
Large 2.8 -7 3.3 -26
Any consolidation 2.9 -24 3.0 -32
By location
Within county 3.7 -11 3.8 -30
Within MSA,
not in
county 1.5 -20 2.1 -37
Out of MSA 2.3 -32 2.7 -33
By size(2)
Small
acquiring
small .4 -40 .8 -50
Medium
acquiring
small 1.9 -16 1.3 -16
Medium
acquiring
medium 2.4 -16 2.5 -36
Large
acquiring
small 3.6 5 2.1 -25
Large
acquiring
medium 3.8 -28 4.4 -22
Large
acquiring
large 3.9 -29 3.6 -37
NOTE. Data are the initial median market share for each category of banking organization-county combination and the median change in market share for each period. 1. See note 1 to table 3. 2. See note 1 to table 6. When banking organization-county combinations involved in a consolidation are distributed according to the type of consolidation that took place, few consistent patterns appear, with two notable exceptions. Grouping banking organization-county combinations according to the location of offices of the acquiring firm, we find that within-county consolidations are associated with larger growth (or smaller declines) in the number of loans extended overall and to the four borrower and neighborhood categories compared with other types of consolidation (table 7). For example, although the overall amount of lending by banking organization-county combinations involved in out-of-MSA consolidations declined 27 percent over 1993-95, the decline was only 9 percent among those combinations involved in within-county consolidations. Banking organization-county combinations are also grouped according to the size of the acquiring and acquired organizations. The most consistent results occur among those consolidations in which the acquirer was large, although the differences were not always statistically significant. Acquisitions of small organizations by large organizations generally are associated with the largest increases in the number of loans extended overall and to the four borrower and neighborhood groups. Acquisitions of large organizations by other large organizations generally are associated with relatively large declines in lending. The finding that consolidation is consistently associated with declines in lending--both overall and across the four borrower and neighborhood groups--appears to support the view that consolidation results in a reduction in home purchase lending, possibly because of a shift away from local decisionmaking, anticompetitive effects, or the acquisition of savings associations by banking organizations. However, some results are inconsistent Reciprocally contradictory or repugnant. Things are said to be inconsistent when they are contrary to each other to the extent that one implies the negation of the other. with these explanations. A reduction of the influence of local decisionmaking would suggest that consolidations in which a large organization acquires a small organization might be associated with larger declines (or less growth) in lending than consolidations in which both the acquirer and acquired organization are large. However the reverse is true--consolidations in which large organizations acquired other large organizations are generally associated with larger declines (or less growth) than consolidations in which large organizations acquired small organizations. Anticompetitive effects would most likely be observed in within-county consolidations; yet these are not associated with a disproportionate dis·pro·por·tion·ate adj. Out of proportion, as in size, shape, or amount. dis pro·por decline in lending. It should be noted, however, that
the finding that out-of-MSA consolidations show the largest declines in
lending is consistent with a shift away from local decisionmaking.
Finally, those consolidations involving the acquisition of savings
associations by banking organizations, which, as noted earlier, could
potentially reduce home purchase lending, show virtually the same
lending patterns as other consolidations.Also, these results cannot readily be explained by a reduction in overall lending by organizations that were involved in consolidation. Overall home purchase lending by these organizations grew 16 percent in 1993-95 and 22 percent during 1995-97 (not shown in tables). Virtually all of this growth was in counties in which the organizations did not have banking offices. The growth in these institutions' home purchase lending in these out-of-market areas was 57 percent over 1993-95 and 69 percent over 1995-97 (not shown in tables). Moreover, the growth in out-of-market lending by these consolidating banking organizations substantially exceeded the growth in home purchase lending by other groups of market participants. The reduction of home purchase lending by consolidating banking organizations in those counties in which they operated offices appears to be part of an overall trend toward geographic diversification. This diversification may have been fueled by the acquisition of large, previously independent mortgage banking organizations and an expansion of activity by previously affiliated mortgage and finance companies. Also, increased standardization standardization In industry, the development and application of standards that make it possible to manufacture a large volume of interchangeable parts. Standardization may focus on engineering standards, such as properties of materials, fits and tolerances, and drafting in the home purchase loan market, facilitated in part by developments in the secondary market and the growing use of automated underwriting, may have reduced the need for banking organizations to maintain a local presence to originate home purchase loans. Changes in Portfolio Shares Results using the portfolio share measure provide a different picture of the effect of consolidation on home purchase lending than those using either market share measures or counts of loans (table 9). Using market share measures or counts of loans showed that organizations involved in consolidation typically reduced their overall lending and lending to the four borrower and neighborhood groups in those counties in which they had banking offices. The portfolio share measure shows that this reduction did not disproportionately affect lending to lower-income and minority borrowers and neighborhoods. Indeed, the portfolio share measure shows that the typical consolidating organization generally increased the proportion of loans extended to each of the four borrower' and neighborhood groups. These changes are generally larger (or less negative) than the changes observed among banking organization-county combinations not involved in consolidation. For example, the change in the portfolio share for lending to minority borrowers for the typical organization involved in a consolidation was 31 percent compared with only 21 percent for the typical organization not involved in a consolidation during 1993-95. When banking organization-county combinations involved in consolidation are distributed according to the type of consolidation (by either location or size of the acquiring and acquired organization), few consistent patterns emerge over the two periods. 9. Portfolio share of home purchase lending by banking organization-county combinations to minority and lower-income borrowers and neighborhoods, by level of consolidation activity and size and location of banking organization, 1993-95 and 1995-97
Percent
Type of borrower(1)
Consolidation Minority
category
for banking
organization-
county combinations 1993-95 1995-97
Initial Percentage Initial Percentage
share change share change
No consolidation 6.3 21 7.5 -6
By size[2]
Small 3.4 20 4.3 -6
Medium 6.3 25 7.5 -6
Large 9.7 19 10.6 -6
Any consolidation 7.2 31 11.1 -5
By location
Within county 8.3 28 13.9 -3
Within MSA, not
in county 4.4 45 8.8 -33
Out of MSA 6.9 31 9.2 -6
By size[2]
Small
acquiring
small 4.6 24 8.1 7
Medium
acquiring
small 6.7 26 9.1 0
Medium
acquiring
medium 7.3 28 7.8 -2
Large
acquiring
small 9.5 28 13.3 -7
Large
acquiring
medium 8.1 31 11.7 -3
Large
acquiring
large 7.2 38 13.8 -10
Type of borrower(1)
Consolidation Lower-income
category
for banking
organization-
county combinations 1993-95 1995-97
Initial Percentage Initial Percentage
share change share change
No consolidation 26.2 -5 26.2 5
By size[2]
Small 27.4 -3 28.0 5
Medium 24.8 -5 24.2 6
Large 26.7 -6 26.7 2
Any consolidation 26.1 3 25.0 8
By location
Within county 26.7 4 23.5 8
Within MSA, not 26.1 4 25.0 9
in county
Out of MSA 25.4 1 26.0 8
By size(2)
Small
acquiring
small 25.5 0 27.8 4
Medium
acquiring
small 26.0 6 24.6 11
Medium
acquiring
medium 23.1 -1 24.1 10
Large
acquiring
small 24.2 -17 26.7 -7
Large
acquiring
medium 27.9 1 24.6 10
Large
acquiring
large 28.1 10 25.0 7
Type of neighborhood(1)
Consolidation
category Minority
for banking
organization- 1993-95 1995-97
county
combinations Initial Percentage Initial Percentage
share change share change
No consolidation 7.3 2 6.7 -5
By size(2)
Small 2.6 0 2.0 -6
Medium 7.9 4 6.7 -4
Large 12.1 2 10.7 -5
Any consolidation 7.9 7 12.2 -2
By location
Within county 9.2 9 17.7 -3
Within MSA,
not in county 2.3 22 8.9 -9
Out of MSA 8.1 3 9.8 0
By size(2)
Small
acquiring
small 5.7 -1 9.1 -21
Medium
acquiring
small 10.4 9 13.5 0
Medium
acquiring
medium 8.8 3 7.3 0
Large
acquiring
small 16.1 0 16.0 1
Large
acquiring
medium 8.8 10 14.5 -3
Large
acquiring
large 6.2 14 13.6 -3
Type of neighborhood(1)
Consolidation
category Lower-income
for banking
organization- 1993-95 1995-97
county
combinations Initial Percentage Initial Percentage
share change share change
No consolidation 7.1 4 7.7 -8
By size(2)
Small 6.4 1 6.7 -8
Medium 6.8 6 7.0 -9
Large 8.7 6 9.0 -7
Any consolidation 7.5 11 8.5 -7
By location
Within county 7.4 12 9.5 -6
Within MSA,
not in county 6.3 21 6.7 -9
Out of MSA 7.9 8 7.5 -7
By size(2)
Small
acquiring
small 6.8 -6 8.0 -10
Medium
acquiring
small 6.9 9 7.2 -6
Medium
acquiring
medium 6.8 2 8.0 -2
Large
acquiring
small 8.7 -1 9.1 19
Large
acquiring
medium 8.0 18 9.1 -9
Large
acquiring
large 8.3 25 8.6 -9
NOTE. Data are the initial median market share for each category of banking organization-county combination and the median change in market share for each period. 1. See note 1 to table 3. 2. See note 1 to table 6. These results are consistent with the view that the CRA has been effective in encouraging banking organizations, particularly those involved in consolidation, to serve lower-income and minority borrowers and neighborhoods. The data, however, are not sufficient to provide a complete evaluation of the effects of the CRA in this regard. For example, no information is available on the prices charged for loans or on whether they were underwritten using special guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. for affordable lending programs. Loans to lower-income and minority borrowers and neighborhoods may be more difficult to underwrite To insure; to sell an issue of stocks and bonds or to guarantee the purchase of unsold stocks and bonds after a public issue. The word underwrite has two meanings. and thus benefit more from a local office presence than from any particular pressures due to the CRA. Moreover, banking organizations have also increased their !ending to lower-income and minority borrowers in counties where they have no banking offices. APPENDIX: CONSTRUCTION OF THE DATABASE The data used in this article combine information on branch office location, home purchase loan originations, and records of bank structure, failures, mergers, and acquisitions from several sources. (See table A.1 for a description of the study sample.)
A.1. Distribution of MSA counties per banking organization and
depository offices and home purchase loans per
organizations--county combinations, 1993, 1995, and 1997
1993 1995
Item
Number Percent Number Percent
Number of MSA
counties with
branch offices
per organization
1 3,923 71.4 3,423 69.4
2 843 15.3 832 16.9
3 291 5.3 264 5.4
4-5 194 3.5 187 3.8
6-9 100 1.8 93 1.9
10-19 79 1.4 69 1.4
20-49 55 1.0 47 10.0
50 or more 13 0.2 17 0.3
Total 5,498 100.0 4,932 100.0
Depository offices
per organization-
county combination
1 4,216 35.9 3,781 34.1
2 2,124 18.1 1,980 17.9
3 1,316 11.2 1,296 11.7
4-5 1,472 12.5 1,426 12.9
6-9 1,273 10.8 1,258 11.4
10 or more 1,338 11.4 1,339 12.1
Total 11,739 100.0 11,080 100.0
Home purchase loans
per organization-
county combination
0 1,336 11.4 1,026 9.3
1-9 2,894 24.7 2,494 22.5
10-19 1,471 12.5 1,430 12.0
20-49 2,142 18.2 2,091 18.9
50-99 1,531 13.0 1,581 14.3
100-499 2,064 17.6 2,144 19.4
500 or more 301 2.6 314 2.8
Total 11,739 100.0 11,080 100.0
1997
Item
Number Percent
Number of MSA counties
with branch offices
per organization
1 3,124 67.2
2 836 18.0
3 268 5.8
4-5 197 4.2
6-9 96 2.1
10-19 54 1.2
20-49 49 1.0
50 or more 22 .5
Total 4,646 100.0
Depository offices
per organization-
county combination
1 3,764 34.0
2 1,962 17.7
3 1,235 11.1
4-5 1,441 13.0
6-9 1,277 11.5
10 or more 1,394 12.6
Total 11,073 100.0
Home purchase loans
per organization-
county combination
0 1,476 13.3
1-9 2,277 20.6
10-19 1,292 11.7
20-49 2,065 18.7
50-99 1,507 13.6
100-499 2,102 19.0
500 or more 354 3.2
Total 11,073 100.0
The location (county) of banking institution depository The place where a deposit is placed and kept, e.g., a bank, savings and loan institution, credit union, or trust company. A place where something is deposited or stored as for safekeeping or convenience, e.g., a safety deposit box. offices (banking offices) was extracted from the annual Summary of Deposits filings for commercial banks and Branch Office Survey System filings for savings associations for the years 1993 through 1997. The office list includes all locations qualifying as separate institution deposit-taking offices under federal guidelines as of June June: see month. 30 of each year. It does not necessarily include all "drive-ins," ATMs, or loan production offices; however, virtually all offices whose presence implies (logic) implies - (=> or a thin right arrow) A binary Boolean function and logical connective. A => B is true unless A is true and B is false. The truth table is A B | A => B ----+------- F F | T F T | T T F | F T T | T It is surprising at first that A => a CRA obligation are reported. Reporting banking institutions include all federally insured The person who obtains or is otherwise covered by insurance on his or her health, life, or property. The insured in a policy is not limited to the insured named in the policy but applies to anyone who is insured under the policy. insured n. commercial banks, savings and loan associations savings and loan association, type of financial institution that was originally created to accept savings from private investors and to provide home mortgage services for the public. The first U.S. savings and loan association was founded in 1831. , cooperative banks Cooperative bank may refer to:
A state-chartered savings bank which is owned by its depositors and managed by a fiduciary board of trustees. , as defined by the Federal Reserve Board's National Information Center (NIC (1) (Network Interface Card) See network adapter. See also InterNIC. (2) (New Internet Computer) An earlier Linux-based computer from The New Internet Computer Company (NICC), Palo Alto, CA. ) database. The locations used for this study may differ slightly from those used elsewhere because of some limited data cleaning required for the analysis. For example, some offices were added for a few institutions that did not submit a Summary of Deposits or Branch Office Survey System filing, and some addresses were corrected for a limited number of offices for which incorrect Incorrect means to not be correct and may also refer to:
Information on home purchase loan originations used in the analysis was obtained from individual mortgage loan data filed under the 1989 amendments to the Home Mortgage Disclosure Act (HMDA). Each year, nearly all commercial banks, savings and loan associations, credit unions, and other mortgage lending institutions (primarily mortgage banks) with assets of more than $10 million (raised to $29 million in 1997) and an office in an MSA are required to report on each mortgage loan purchased and on each loan application related to a one- to four-unit residence acted upon during the calendar year. Lenders must report the loan amount, state, county, and census tract of the property, whether the property would be owner occupied "Owner occupied" may also refer to a housing cooperative Owner occupied is a classification of UK housing tenure as described by the Department for Communities and Local Government, a UK government department that has amongst its remit the monitoring of the UK housing stock. , purpose of the loan, type of loan (conventional, FHA, or VA), application disposition Act of disposing; transferring to the care or possession of another. The parting with, alienation of, or giving up of property. The final settlement of a matter and, with reference to decisions announced by a court, a judge's ruling is commonly referred to as disposition, regardless of (loan originated, application withdrawn, or application denied), race and gender of the loan applicant, and the applicant income relied on by the lending institution in making the loan decision.(27) For this study, the sample was restricted to loans originated for the purchase of owner-occupied units. The sample includes both conventional loans and loans backed by government guarantees. Information on the census tract location of the property being purchased was used to determine which loans were originated in lower-income or minority neighborhoods. Loans for properties in census tracts whose 1990 median family income was less than 80 percent of the 1990 median family income of their MSA were classified as loans to lower-income neighborhoods. Similarly, loans for properties in census tracts with more than 20 percent minority residents in 1990 were classified as loans to minority (black, Asian, Hispanic, Native American, and "other race") neighborhoods. The race of the primary applicant was used to determine minority borrower loans, and loans to borrowers whose income was below 80 percent of the current-year median family income of their MSA were classified as loans to lower-income borrowers. Under current law, most institutions with offices in MSAs are required to report all their mortgage lending regardless of location but to provide geographic detail only for loans originated in metropolitan areas. Thus, the information needed to determine lending to lower-income and minority neighborhoods was available only for counties in MSAs. Consequently we restricted the dataset See data set. to these counties. Further, because the number and boundaries Natural or artificial separations or divisions between adjoining properties that show their limits. Boundaries are used to establish private and public ownership by determining the exact location of the points at which one piece of land is distinguishable from another. of MSAs changed slightly from 1993 to 1997, the dataset was limited to the 726 counties that were part of MSAs in both 1993 and 1997.(28) These counties represent about 20 percent of all counties in the United States but contain 78 percent of the total population and 70 percent of the banking offices. A further step had to be taken to align align (  līn),v to move the teeth into their proper positions to conform to the line of occlusion. the banking office and lending data. Banking institutions report their offices as of June 30 of each year but file HMDA reports on a calender-year basis. The institution's current structure is used for each filing. Thus, for example, if two banking institutions merged on December December: see month. 15, they would file a consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: HMDA filing on December 31 showing their combined lending for the whole year. However, their branch office filing, done as of the previous June 30, would show them as separate institutions. To reconcile these differences, the institution's structure as of the end of the year was used to classify clas·si·fy tr.v. clas·si·fied, clas·si·fy·ing, clas·si·fies 1. To arrange or organize according to class or category. 2. To designate (a document, for example) as confidential, secret, or top secret. bank branches and to determine those counties where in our construct they had a CRA obligation. These numbers may differ from the actual location of offices at the end of the year to the extent that banking institutions may have opened or closed offices in the six-month period between June 30 and December 31. The final information needed for the study was to determine the appropriate structure to use in classifying banking institutions and to determine which institutions were involved in consolidation during the 1993-95 and 1995-97 study periods. Transactions and structure information recorded in the Federal Reserve Board's NIC database was used for this purpose. For each of the three-year study periods used in the analysis, institutions were initially classified by their membership in banking organizations as of December 31 of the first year of the study period (1993 or 1995). These organizations included bank and thrift thrift: see leadwort. holding companies and foreign bank payment groups (commercial banks chartered in the United States that are subsidiaries of a common foreign bank). Both lending and office data were consolidated at the organization level. Thus, for example, if any banking institution member of a bank holding company had an office in a county, the organization was deemed to have a CRA obligation there. Similarly, all home purchase lending in the county, including lending by mortgage bank or finance company subsidiaries of the holding company and by all its member banks and their subsidiaries, was included in determining the organization's total home purchase lending in the county. The size of an organization was computed as the sum of the assets of its member banking institutions.(29) Banking institutions that were not members of a larger organization were treated as independent organizations. A similar method was used to reclassify Verb 1. reclassify - classify anew, change the previous classification; "The zoologists had to reclassify the mollusks after they found new species" class, classify, sort out, assort, sort, separate - arrange or order by classes or categories; "How would you banking institutions by their membership in organizations at the end of each of the three-year study periods. A banking institution that merged into another institution would be reclassified as part of the acquiring institution, for example, and members of a holding company acquired by another holding company would similarly be reclassified as part of the acquiring holding company. All organizations (or institutions) with different membership at the beginning and end of each study period were deemed to have undergone a "consolidation" during the period.(30) This includes both banking institutions and holding companies that acquired or merged with previously independent banking institutions or holding companies. It does not include, however, mergers among subsidiaries of the same holding company, because they were already members of the same organization at the beginning of the period. Nor does it include acquisitions of nonbank non·bank adj. Of, relating to, or done by a business or an institution that is not a bank but performs similar services. affiliates, such as mortgage or finance companies. For some of the analysis it was necessary to differentiate between the "acquirer" and "acquired" components of a consolidation. These determinations were not always apparent from the record. Consequently, we decided to designate des·ig·nate tr.v. des·ig·nat·ed, des·ig·nat·ing, des·ig·nates 1. To indicate or specify; point out. 2. To give a name or title to; characterize. 3. the largest component of an organization (as measured by its asset size at the beginning of the period) as the "acquirer." All other components were treated as "acquired." Thus if four banking institutions merged into a common holding company over the study period, the institution with the most assets in the beginning of the period would be deemed to have acquired the other three. Consolidations were measured at the county level. A consolidation was deemed to have occurred in the county only if a banking institution (or organization) with an office in the county at the beginning of the period was acquired by another institution (or organization) during the period. If the acquiring organization also had offices in the county at the beginning of the period it was treated as a within-county consolidation; if the acquiring organization had offices within the MSA, but not the county, it was treated as a within-MSA-but-not-county consolidation. Otherwise the merger was treated as an out-of-MSA consolidation. Note that under this definition, an organization was considered to have undergone a consolidation in a county in which only the acquiring component of the organization had offices at the beginning of the period. Finally, the change in lending for those counties where organizations underwent consolidation was computed by comparing the sum of the lending in a county by all components of the organization in the first year of the study period (1993 or 1995) with the lending reported by the overall organization in the county in the final year (1995 or 1997). Again, only those counties with acquired components were considered in making this calculation. (1.) In this article, the term banking institution refers to commercial banks and savings associations (savings banks savings bank, financial institution that, until recently, performed only the following functions: receiving savings deposits of individuals, investing them, and providing a modest return to its depositors in the form of interest. and savings and loan associations). It does not include credit unions and mortgage or finance companies. The term banking office includes all locations qualifying as separate deposit-taking offices under federal guidelines. (2.) In this article, the term banking organization refers to commonly owned commercial banks and savings associations and their subsidiaries and affiliates, including, for example, mortgage and finance companies. Generally, a banking organization with multiple banking institutions is termed a bank or thrift holding company. (3.) Loans involving borrowers with income below 80 percent of the current-year median family income of their respective metropolitan statistical areas (MSAs) were classified as loans to lower-income borrowers. Loans to black, Asian, Hispanic, Native American, and "other race" borrowers were classified as loans to minorities. Information on the census tract location of the property being purchased was used to determine which loans were originated in lower-income or minority neighborhoods. Loans for properties in census tracts whose 1990 median family income was less than 80 percent of the 1990 median family income of their MSA were classified as loans to lower-income neighborhoods. Similarly, loans for properties in census tracts with more than 20 percent minority residents in 1990 were classified as loans to minority neighborhoods. (4.) See, for example, Allen Al·len , Edgar 1892-1943. American anatomist who is noted for his studies of hormones and for the discovery (1923) of estrogen. N. Berger Berger may refer to: Places
Berger is a relatively common last name. It means mountaineer in Dutch and German, and shepherd in French. , Anthony Saunders Saun´ders n. 1. See Sandress. , Joseph M. Scalise, and Gregory F. Udell, "The Effects of Bank Mergers and Acquisitions on Small Business Lending," Journal of Financial Economics, vol. 50 (February February: see month. 1999); Joseph Peek and Eric S. Rosengren Eric S. Rosengren took office on July 23, 2007, as the thirteenth president and chief executive officer of the Federal Reserve Bank of Boston, serving the First District. He serves the remainder of a term that began on March 1, 2006. , "Bank Consolidation and Small Business Lending: It's it's 1. Contraction of it is. 2. Contraction of it has. See Usage Note at its. it's it is or it has it's be ~have Not Just Size That Matters," Journal of Banking and Finance, vol. 22 (August 1998), pp. 799-820; Paul Paul, 1901–64, king of the Hellenes (1947–64), brother and successor of George II. He married (1938) Princess Frederika of Brunswick. During Paul's reign Greece followed a pro-Western policy, and the Cyprus question was temporarily resolved. S. Calem and Leonard Leon·ard , Ray Charles Known as "Sugar Ray." Born 1956. American boxer who won the 1976 Olympic light welterweight title. He held five world titles as both a welterweight and middleweight between 1979 and 1987. Noun 1. J. Nakamura Nakamura may refer to:
Timothy, two letters of the New Testament. With Titus they comprise the Pastoral Epistles, in which St. Paul addresses his coworkers as the guardians and transmitters of his teaching. H. Hannan Hannan is a popular Irish surname coming from the Gaelic Ó hAnnáin or Ó hAnáin, most prevalently found in County Cork in the south-eastern portion of the Emerald Isle. [1] Hannan is also a popular first name in Arabic cultures. and Robin A. Prager Prager is a surname, which may refer to:
A merger occurring between companies producing similar goods or offering similar services. Notes: This type of merger occurs frequently as a result of larger companies attempting to create more efficient economies of scale. Generate Significant Price Effects? Evidence from the Banking Industry," Journal of Industrial Economics, vol. 46 (December 1998), pp. 432-52; Robert Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. B. Avery A·ver·y , Oswald 1877-1955. American bacteriologist noted for establishing (1944) that DNA is responsible for the transmission of heritable characteristics. , Raphael Raphael (răf`ēəl, rā`–), archangel. He is prominent in the book of Tobit, as the companion of Tobias, as the healer of Tobit, and as the rescuer of Sara from Asmodeus. Milton made him a featured character of Paradise Lost. W. Bostic Bostic can refer to: People
(5.) The CRA directs the federal banking agencies to evaluate each institution's performance in meeting its community's credit needs and to consider this performance when acting on applications for mergers and acquisitions. For a discussion of the Community Reinvestment Act and the implementing regulation, see the Federal Reserve Press Release, April 24, 1995. Revisions ReVisions is a 2004 anthology of alternate history short-stories. It is edited by Julie E. Czerneda and Isaac Szpindel. Contents Title Author The Resonance of Light James Alan Gardner Out of China Julie E. to the implementing regulation in 1995 include performance tests that consider an institution's record of lending both to lower-income neighborhoods and to lower-income borrowers. (6.) Although HMDA data on home purchase lending in metropolitan areas have been collected since 1977, 1993 is selected as the initial year for the analysis for two reasons. First, information on the income and race or ethnic origin of borrowers has been included in the HMDA data only since 1990, which precludes the analysis of the effects of mergers on borrowers arrayed by these characteristics before that year. Second, 1993 is the first year the HMDA data include the lending activity of most of the nation's most active independent mortgage companies--firms that extend about one-third of the home purchase loans in metropolitan areas. Analyses that exclude such active mortgage lenders would provide only a partial, and potentially distorted, picture of the mortgage market. (7.) The two main federal antitrust laws are the Clayton Act A federal law enacted in 1914 as an amendment to the Sherman Anti-Trust Act (15 U.S.C.A. § 1 et seq. [1890]), prohibiting undue restriction of trade and commerce by designated methods. The Clayton Act (15 U.S.C.A. § 12 et seq. of 1914 and the Sherman Sherman, city (1990 pop. 31,601), seat of Grayson co., N Tex., near the Red River; inc. 1858. Originally on a stagecoach route, it is a highway and railroad junction. Manufactures include electronic equipment, processed foods, military equipment, and metal products. Act of 1890. In addition, the Bank Holding Company Act of 1956 and the Bank Merger Act of 1960 include antitrust Antitrust The antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade. provisions that specifically pertain to pertain to verb relate to, concern, refer to, regard, be part of, belong to, apply to, bear on, befit, be relevant to, be appropriate to, appertain to the activities of banking organizations. (8.) The proportion of domestic banking assets accounted for by the 100 largest banking organizations rose from just over 50 percent in 1980 to 70 percent in June 1998. Notably, however, small community banks have generally been able to retain their market shares and profitability in competition in banking markets increasingly dominated dom·i·nate v. dom·i·nat·ed, dom·i·nat·ing, dom·i·nates v.tr. 1. To control, govern, or rule by superior authority or power: by the major banks (testimony Oral evidence offered by a competent witness under oath, which is used to establish some fact or set of facts. Testimony is distinguishable from evidence that is acquired through the use of written sources, such as documents. testimony n. by Governor Laurence Laurence is the surname or the given name of several people: Surname
American writer and a founder of Barnard College at Columbia University (1889). Her plays include The Dominant Sex (1911) and Black Souls (1932). before the Committee on Banking and Financial Services, U.S. House of Representatives, April 29, 1998). (9.) See Board of Governors of the Federal Reserve System Board of Governors of the Federal Reserve System The managing body of the Federal Reserve System, which sets policies on bank practices and the money supply. , Report to the Congress on Community Development Lending by Depository. Institutions (Board of Governors, October October: see month. 1993). (10.) For discussion of the potential advantages of small banks, see Leonard I. Nakamura, "Small Borrowers and the Survival of the Small Bank," Federal Reserve Bank of Philadelphia The Federal Reserve Bank of Philadelphia, headquartered in Philadelphia, Pennsylvania, is responsible for the Third District of the Federal Reserve, which covers eastern Pennsylvania, southern New Jersey, and Delaware. , Business Review (November/December 1994), pp. 3-13. (11.) See Robert B. Avery, Patricia E. Beeson Beeson may refer to: People:
(12.) See William William, crown prince of Germany William or Frederick William, 1882–1951, crown prince of Germany, son of William II. In World War I he commanded (1914) an army on the Western Front and was nominal commander in the German attack W. Lang Lang language LANG Louisiana Army National Guard Lang Langobardian (linguistics) LANG Los Angeles Newspaper Guild and Leonard I. Nakamura, "A Model of Redlining Identifying text that has been changed in a word processing document by displaying it in a special color, for example. It allows the original author of the text or other users to see ongoing revisions. The term comes from manual editing where a red pen is used to mark up the pages. ," Journal of Urban Economics, vol. 33 (1993), pp. 223-34. (13.) See Report to the Congress on Community Development Lending by Depository Institutions Depository institution A financial institution that obtains its funds mainly through deposits from the public. This includes commercial banks, savings and loan associations, savings banks and credit unions. . (14.) The theory of prejudicial prej·u·di·cial adj. 1. Detrimental; injurious. 2. Causing or tending to preconceived judgment or convictions: discrimination developed by Becker Beck´er n. 1. (Zool.) A European fish (Pagellus centrodontus); the sea bream or braise. suggests that lenders who enjoy market power may choose to sacrifice sacrifice [Lat. sacrificare=to make holy], a type of religious offering, or gift to a superior or supreme being, in which the offering is consecrated through its destruction. profits to engage in discriminatory practices. However, the theory also suggests that under competitive conditions, prejudicial discrimination cannot be sustained in the long run because capital will flow to those firms that forgo discrimination and consequently earn higher profits. See Gary Gary, city (1990 pop. 116,646), Lake co., NW Ind., a port of entry on Lake Michigan; inc. 1909. Gary was founded by the U.S. Steel Corporation, which purchased the land in 1905 and landscaped it for a city. S. Becker, The Economics of Discrimination (Chicago Chicago, city, United States Chicago (shĭkä`gō, shĭkô`gō), city (1990 pop. 2,783,726), seat of Cook co., NE Ill., on Lake Michigan; inc. 1837. : University of Chicago Press The University of Chicago Press is the largest university press in the United States. It is operated by the University of Chicago and publishes a wide variety of academic titles, including The Chicago Manual of Style, dozens of academic journals, including , 1957). (15.) Previous research finds evidence of offsetting responses by other market participants. For example, the closure of branches by merging institutions with overlapping branch networks is partly offset by the opening of new branches by other institutions. See Avery, Bostic, Calem, and Canner, "Changes in the Distribution of Banking Offices." Also, research on the effect of consolidation on small business lending finds that non-merging banks collectively tend to increase their supply of small business credit when mergers occur in their markets. See Berger, Saunders, Scalise, and Udell, "The Effects of Bank Mergers and Acquisitions on Small Business Lending." (16.) See Griffith Griffith, town (1990 pop. 17,916), Lake co., extreme NW Ind.; inc. 1904. It is primarily a residential town in the Chicago metropolitan area. Manufactures include metal products, chemicals, and electronic equipment. L. Garwood Garwood can refer to: People
killed his father at his mother’s instigation. [Br. Balladry: Edward in Benét, 302] See : Patricide M. Gramlich, "Examining Community Reinvestment Reinvestment Using dividends, interest and capital gains earned in an investment or mutual fund to purchase additional shares or units, rather than receiving the distributions in cash. 1. In terms of stocks, it is the reinvestment of dividends to purchase additional shares. ," at Widener University Widener University is a private, coeducational university located in Chester, Pennsylvania. Its main campus sits on 108 acres (.44 km²), just 14 miles south of Philadelphia. , Chester, Pennsylvania Chester is a city in Delaware County, Pennsylvania located just to the south of Philadelphia, population 36,854 at the 2000 census. Chester's most famous son may well be John Morton, who cast the deciding vote on the Declaration of Independence. , November November: see month. 6, 1998. (17.) See Alex (language) Alex - 1. A polymorphic language being developed by Stephen Crawley <sxc@itd.dtso.oz.au> of Defence Science & Tech Org, Australia. Alex has abstract data types, type inference and inheritance. 2.
adj. Of or relating to individuals or households supported by an income that is below average. Households and Neighborhoods: Do Community Reinvestment Agreements Make a Difference?" Journal of Urban Affairs, vol. 20, no. 3 (1998), pp. 269-301. (18.) A Herfindahl-Hirschman index (HHI) based on banking deposits is a standard measure used to assess the competitiveness of banking markets. The Federal Reserve Board includes thrift deposits at 50 percent in calculating market HHI values for its bank merger analysis. (For more details, see Anthony W. Cyrnak, "Bank Merger Policy and the New CRA Data," Federal Reserve Bulletin, vol. 84 (September 1998), pp. 703-15.) In this analysis, we include deposits by savings associations at 100 percent in calculating HHI values for each MSA because savings associations are active competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. in the home mortgage lending market. (19.) For additional information about these patterns, see the Federal Financial Institutions Examination Council press release, August 6, 1998. (20.) For more information see Robert B. Avery, Raphael W. Bostic, Paul S. Calem, and Glenn B. Canner, "Credit Risk, Credit Scoring Credit scoring A statistical technique that combines several financial characteristics to form a single score to represent a customer's creditworthiness. , and the Performance of Home Mortgages," Federal Reserve Bulletin, vol. 82 (July July: see month. 1996), pp. 621-48. (21.) The competitive nature of the market becomes apparent when comparing HHI measures based on home purchase loans with HHI measures based on deposits. The former are consistently lower than the latter, and often by a substantial amount. (22.) This restriction restriction - A bug or design error that limits a program's capabilities, and which is sufficiently egregious that nobody can quite work up enough nerve to describe it as a feature. removes only about 1 percent of the home purchase loans from the sample. (23.) See, for example, Glenn B. Canner, Wayne Wayne, city (1990 pop. 19,899), Wayne co., SE Mich., a suburb of Detroit, on the Lower Rouge River; inc. as a village 1869, and with surrounding areas as a city 1960. It has automobile and aircraft industries and other varied manufactures. Passmore, and Brian The name Brian (sometimes spelled Bryan) comes from an Irish backround. It is of Celtic origin and its meaning may be "hill" or "strong, noble, and high"[1]. J. Surette, "Distribution of Credit Risk among Providers of Mortgages to Lower-Income and Minority Homebuyers," Federal Reserve Bulletin, vol. 82 (December 1996), pp. 1077-1102. (24.) The sum includes all lending in the county by all component parts of the organization in the first period, including those components that did not have banking offices or CRA obligations. (25.) For example, in each of the sample periods about 27 percent of the banking organization-county combinations had no lending to minority neighborhoods. This result likely reflects a relatively large number of smaller banks located in counties with small numbers of minority neighborhoods. (26.) While this procedure reduces the sample, it does not result in a significant decline in the number of banking organization-county combinations involved in consolidation that were included in the sample. Very few organizations that had no lending in either period were involved in a consolidation. For example, over 1995-97, less than 1 percent of all banking organization--county combinations in the sample that were involved in consolidation made no loans to minority borrowers or to lower-income borrowers. (27.) See Glenn B. Canner and Dolores S. Smith, "Home Mortgage Disclosure Act: Expanded Data on Residential Lending," Federal Reserve Bulletin, vol. 77 (November 1991), pp. 859-81, for a comprehensive discussion of the HMDA data. It is estimated that 80 percent to 87 percent of all home purchase loans were reported under HMDA for the 1993-97 period. The FFIEC makes the HMDA data available in various formats, including paper summaries, magnetic tape, PC diskette The official name for the floppy disk. See floppy disk. diskette - floppy disk , CD-ROM CD-ROM: see compact disc. CD-ROM in full compact disc read-only memory Type of computer storage medium that is read optically (e.g., by a laser). , and at the FFIEC web site (www.ffiec.gov See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. ). An order form for the HMDA data may be obtained by calling the FFIEC at (202) 634-6526 or by downloading downloading - download the form from the FFIEC web site. (28.) To correspond to the taxonomy taxonomy: see classification. taxonomy In biology, the classification of organisms into a hierarchy of groupings, from the general to the particular, that reflect evolutionary and usually morphological relationships: kingdom, phylum, class, order, used by the Bureau of the Census Noun 1. Bureau of the Census - the bureau of the Commerce Department responsible for taking the census; provides demographic information and analyses about the population of the United States Census Bureau in constructing county-level economic data, information for some counties was combined. Primarily this involved consolidating some independent cities in Virginia This is a complete list of independent cities in the Commonwealth of Virginia in the United States. As of 2005, there are 39 independent cities, which are considered county-equivalents for census purposes. with their surrounding sur·round tr.v. sur·round·ed, sur·round·ing, sur·rounds 1. To extend on all sides of simultaneously; encircle. 2. To enclose or confine on all sides so as to bar escape or outside communication. n. counties. (29.) This amount may differ somewhat from the total assets reported by bank and thrift holding companies for their combined operations For the department of the British War Office during World War II, see . In the military, combined operations are operations conducted by forces of two or more allied nations acting together for the accomplishment of a single mission. See also
(30.) A few institutions were liquidated in each of the study periods. Similarly, a number of new (de novo [Latin, Anew.] A second time; afresh. A trial or a hearing that is ordered by an appellate court that has reviewed the record of a hearing in a lower court and sent the matter back to the original court for a new trial, as if it had not been previously heard nor decided. ) institutions were formed. Cases of both types were excluded from the analysis. Moreover, an organization acquiring a de novo bank is not treated as having undergone a merger because the de novo institution did not exist at the beginning of the period. RELATED ARTICLE: Geographic Restrictions in Banking Historically, the ability of banking institutions to merge See mail merge and concatenate. or to buy one another and to establish branch offices both within and across local communities has been sharply curtailed by federal and state laws limiting geographic expansion by banks.(1) Over the past two decades or so, many of these laws have been changed or eliminated, resulting in the easing of barriers to consolidation. Before 1975 intrastate in·tra·state adj. Relating to or existing within the boundaries of a state. Adj. 1. intrastate - relating to or existing within the boundaries of a state; "intrastate as well as interstate commerce" restrictions on bank branching were commonplace. For example, only seventeen Seventeen novel of young love. [Am. Lit.: Booth Tarkington Seventeen in Magill I, 882] See : Adolescence states allowed commercial banks to establish offices within their state with few or no geographic restrictions. Since then, mainly in the 1980s, geographic restrictions on intrastate branching have been removed or relaxed relaxed, adj freed from tension, being at ease, as applied to muscles and the mind. substantially in all states. The easing of these restrictions allows banking organizations to expand their geographic reach by establishing or acquiring branch offices rather than by merging with, or acquiring, another banking institution. Geographic restrictions on banking extended beyond branching limitations to restrictions on banking institutions merging with, or acquiring, organizations in another state. For example, until the 1970s, no state permitted out-of-state out-of-state adj. Of, relating to, or being from another state. commercial banking organizations to operate in-state banking subsidiaries. State barriers began to fall in 1978 when Maine Maine, ship Maine, U.S. battleship destroyed (Feb. 15, 1898) in Havana harbor by an explosion that killed 260 men. The incident helped precipitate the Spanish-American War (Apr., 1898). Commanded by Capt. Charles Sigsbee, the ship had been sent (Jan. relaxed restrictions on entry by out-of-state holding companies. During the next fifteen years or so, every state except Hawaii Hawaii, island, United States Hawaii, island (1990 pop. 120,217), 4,037 sq mi (10,456 sq km), largest and southernmost island of the state of Hawaii and coextensive with Hawaii co.; known as the Big Island. followed suit by allowing some degree of interstate in·ter·state adj. Involving, existing between, or connecting two or more states. n. One of a system of highways extending between the major cities of the 48 contiguous United States. Noun 1. banking. The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 further eased restrictions on interstate banking in two important ways. First, it allowed bank holding companies to acquire a bank in any state provided certain conditions were met, including compliance with the CRA. Second, it substantially eased restrictions on interstate branching, although some important restrictions continue to exist. (1.) For a discussion of the various banking laws, see Avery, Bostic, Calem, and Canner, "Changes in the Distribution of Banking Offices," pp. 712-13 and Anthony W. Cyrnak, "Bank Merger Policy and the New CRA Data," Federal Reserve Bulletin, vol. 84 (September 1998), pp. 703-15. RELATED ARTICLE: Performance Standards Used to Measure the Effects of Consolidation at the Organization Level Three performance standards are used to measure the effects of consolidation: the number of home purchase loans, market share, and portfolio share. Three measures are used because, while each may provide insight into home purchase lending in a market, each also has some shortcomings A shortcoming is a character flaw. Shortcomings may also be:
The number of home purchase loans an organization makes is one indicator Indicator Anything used to predict future financial or economic trends. Notes: In the context of technical analysis, an indicator is a mathematical calculation based on a securities price and/or volume. The result is used to predict future prices. of the level of service it provides to a local area, Changes in this measure show whether lending is increasing or decreasing. However, exclusive consideration of this measure may lead to misleading inferences. The number of loans does not provide an indication of how well an organization is performing relative to other organizations in a given market. It also fails to show an organization's own relative commitment to certain types of lending. The second measure, market share, addresses the first of these limitations. Changes in an organization's market share of home purchase loans provide a measure of how its activity is changing relative to the market as a whole. Increases (decreases) in market share indicate that an organization has a greater (lesser) presence in a given type of lending. Trends in market share do not necessarily mirror trends in the number of loans. For example, an organization's market share can decline even while the number of its loans increases if other organizations increase their levels of lending more rapidly. The market share measure, however, is not without its own limitations as a measure of performance. Most prominently, an organization's market share may be greatly influenced by the actions of other competitors in the market and changes in the demand for home purchase loans, both of which are largely outside its control. The portfolio share measure provides another gauge gauge In manufacturing and engineering, a device used to determine whether a dimension is larger or smaller than a reference standard. A snap gauge, for example, is formed like the letter C, with outer “go” and inner “not go” jaws, and is used to of an organization's relative experience with a given type of lending. Like the market share measure, trends in portfolio share can be different from trends in the number of loans. However, unlike the market share measure, the portfolio share measure tends not to be overly sensitive to the activities of market competitors. The limitation of this measure is that an organization may have a growing portfolio share of lending to a given population yet a shrinking presence overall in lending to that population, measured either in terms of absolute numbers of loans or market share. |
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