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BANK PERFORMANCE IN MEETING LOCAL COMMUNITY NEEDS: A COMPARATIVE STUDY OF INDEPENDENT AND CHAIN BANKING IN RURAL NEBRASKA
Abstract
Over the years numerous studies on the performance of alternative organizational structures in banking have been made. In many of these studies organizational structure is deemed important because of its possible effects on market structure, and in turn, on price and output variables. Performance studies in rural areas generally follow the same line of inquiry with understandably more emphasis on price and output variables related to rural areas. The purpose of this study was to compare the performance of chain and independent banks in meeting rural community needs. In addition to general price and output variables, performance of the grouped banks were judged in terms of their possible impacts on the viability of rural communities. To do this, a series of balance sheet and income statement ratios for rural Nebraska banks were analyzed using both univariate and multivariate techniques to detect general differences in managerial approaches between the grouped banks. In addition to these more general differences, the common contentions that multibank or multioffice organizations tend to siphon funds from rural areas, allocate funds to larger borrowers and use impersonal credit standards were evaluated with the use of both balance sheet data and a mail survey of rural Nebraska banks. The results indicated that chain banks were generally more aggressively managed then independent banks over the nine-year period, 1972-80. This aggressiveness was characterized by their lower secondary reserves and higher loans as a percent of assets, together with a higher pricing structure for both interest rates paid and charged. With repect to the more specific issues, there was no indication that chain banks relative to independents were siphoning funds from rural areas. There was also no indication that the terms of loan agreements were less favorable to smaller agricultural borrowers by any of the grouped banks. Chain banks did, however, have higher average loan sizes which may have been a result of their greater involvement in agricultural participation loans. Finally, although chain banks did indicate they they generally used more formal credit evaluation techniques, there seemed to be little difference in the actual criteria used to evaluate agricultural borrowers.
Subject Area
Finance
Recommended Citation
NEJEZCHLEB, LYNN ALBERT, "BANK PERFORMANCE IN MEETING LOCAL COMMUNITY NEEDS: A COMPARATIVE STUDY OF INDEPENDENT AND CHAIN BANKING IN RURAL NEBRASKA" (1982). ETD collection for University of Nebraska-Lincoln. AAI8227032.
https://digitalcommons.unl.edu/dissertations/AAI8227032