Decline in State Chartered Banks: Causes, Concerns, and Conclusions

This paper investigates the decline of state chartered banks in the rural states Alabama, Arkansas, Nebraska, Oklahoma, and Tennessee. We use bank capital as the dependent variable for the mixed model regression analysis. We analyze both state and bank specific variables to determine which factors have more influence on bank equity capital. The findings indicate that as bank equity capital increases, the number of state chartered banks decreases. We also find that small agriculture business loans increase as equity capital increases, showing that in our sample of rural states agriculture is significant in providing a capital buffer for state chartered banks. However, we find that loans secured by farmland do not statistically influence bank equity capital.