Earnings, risk-taking, and capital accumulation in small and large community banks

We examine the relationships between ownership structure and both earnings and risk-taking among community banks before, during, and after the US financial crisis. We find that publicly-held small community banks had lower earnings than privately-held ones before the recession, but had higher earnings during and after the recession. Publicly-held small community banks exhibited similar risk-taking to privately-held ones before and during the recession, but greater risk-taking after. We also find that publicly-held small community banks de-risked more slowly than privately-held ones following the recession. Large community banks, on the other hand, show no consistent relationship between ownership structure and earnings, and a strong cyclical relationship between ownership structure and risk-taking. These findings expand our understanding of how community bank performance and capital accumulation behaves through different cyclical periods, and how ownership structure affects that behavior. (C) 2019 Elsevier B.V. All rights reserved.