Kroll Bond Rating Agency Publishes Financial Institutions Research: “The Case for Community Banks”

NEW YORK--()--Kroll Bond Rating Agency (KBRA) has released a new research report entitled “The Case for Community Banks.” The report makes the following key points:

  • Based on a thorough review of relevant data, and factoring in our extensive experience in rating nearly 100 community banks—each one factoring in in-depth conversations with management teams— Kroll Bond Rating Agency (KBRA) has a high degree of confidence that well-run community banks deserve to be rated in the investment grade category.
  • Though it might strike some as counterintuitive, KBRA believes community banks can compete successfully with much larger banks. A closer examination of cost structure—both interest and noninterest expense—reveals that community banks (assets less than $10 billion) are not at a competitive disadvantage from a pricing power standpoint.
  • KBRA believes that the benefits that accrue to smaller banks by virtue of being local—in terms of market knowledge, deeper customer relationships, and superior responsiveness—can offset the advantages derived from larger banks’ size, most notably more efficient processing, more sophisticated risk management, broader product offerings, and larger marketing spend.
  • The concentration of risks—both geographic and in the loan book—is a key differentiating feature between smaller banks and larger ones; well-run community banks with demonstrably advantageous local share have proven that those risks are manageable. In fact, many community banks in KBRA’s rated universe consistently produce superior risk-adjusted profitability compared to many of the larger U.S. banks.

About Kroll Bond Rating Agency

KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).

Contacts

Kroll Bond Rating Agency
Analytical
Van B. Hesser, 646-731-2305
Senior Managing Director
vhesser@kbra.com
Follow us on Twitter!
@KrollBondRating

Contacts

Kroll Bond Rating Agency
Analytical
Van B. Hesser, 646-731-2305
Senior Managing Director
vhesser@kbra.com
Follow us on Twitter!
@KrollBondRating