Perceptions of the Future of Bank Merger Antitrust: Local Areas Will Remain Relevant Markets
FORDHAM JOURNAL OF
CORPORATE & FINANCIAL LAW
Fordham Journal of Corporate & Financial Law
Gregory J. Werden
Copyright c 2008 by the authors. Fordham Journal of Corporate & Financial Law is produced
by The Berkeley Electronic Press (bepress). http://ir.lawnet.fordham.edu/jcfl
* Senior Economic Counsel, Antitrust Division, U.S. Department of Justice. The views
expressed herein are not purported to represent those of the U.S. Department of Justice.
This article was presented at the November 13, 2007 conference on The Antitrust
Aspects of Bank Mergers held at Fordham Law School.
When asked to offer “perceptions of the future” on bank merger
antitrust enforcement, I recalled a statement attributed to physicist Niels
Bohr: “Prediction is very difficult, especially about the future.”1 And so
it is for the future of antitrust. Nevertheless, my perception is that bank
merger antitrust will change very little in that the geographic scope of
the relevant market for important banking services is, and will remain,
local.2 Before peering into the future, however, it is useful to lay a
foundation by considering past and present bank merger enforcement.
The U.S. Department of Justice (“DOJ”) reviews roughly 600 bank
mergers per year,3 of which it “challenges” roughly one, although these
“challenges” do not entail the filing of complaints in district court. In
fact, the DOJ has not filed a complaint against a bank merger since
1993.4 Rather, approximately once per year the DOJ issues a press
release announcing that competitive concerns with a bank merger have
been resolved though the divestiture of branches along with associated
deposits and outstanding loans.5
1. The Quotations Page, http://www.quotationspage.com/quote/26159.html (last
visited Feb. 26, 2008).
2. My perception is not based so much on expertise in the banking industry as on
expertise in the delineation of relevant markets in merger cases. See, e.g., Gregory J.
Werden, Beyond Critical Loss: Tailored Application of the Hypothetical Monopolist
Test, 4 COMPETITION L.J. 69 (2005); Gregory J. Werden, Demand Elasticities in
Antitrust Analysis, 66 ANTITRUST L.J. 363, 387–96 (1998); Gregory J. Werden, Market
Delineation under the Merger Guidelines: A Tenth Anniversary Retrospective, 38
ANTITRUST BULL. 517 (1993) [hereinafter Werden, Tenth Anniversary Retrospective];
Gregory J. Werden, Market Delineation and the Justice Department’s Merger
Guidelines, 1983 DUKE L.J. 514; Gregory J. Werden, The Use and Misuse of Shipments
Data in Defining Geographic Markets, 26 ANTITRUST BULL. 719, 721 (1981).
3. U.S. Dep’t of Justice, Antitrust Division Workload Statistics Fiscal Year
19982007, at 3, http://www.usdoj.gov/atr/public/workstats.pdf (last visited Mar. 12, 2008).
4. The last two complaints filed in district court were those in United States v.
Texas Commerce Bancshares, Inc. 1993-2 Trade Cas. (CCH) ¶ 70,326 (N.D. Tex. 1993)
(challenging the acquisition of New First City Bank-Midland N.A.) and United States v.
Texas Commerce Bancshares, Inc., 1993-2 Trade Cas. (CCH) ¶ 70,363 (N.D. Tex.
1993) (challenging the acquisition of New First City Bank-Beaumont N.A.).
5. See, e.g., Press Release, Dep’t of Justice, Justice Department Reaches
Agreement Requiring Divestitures In Merger Of First Busey Corporation And Main
Street Trust Inc. (June 12, 2007), available at http://www.usdoj.gov/atr/public/press_rel
eases/2007/223869.htm (merger of First Busey Corp. and Main Street Trust Inc.); Press
Release, Dep’t of Justice, Justice Department Reaches Agreement Requiring
Divestitures In Merger Of Regions Financial Corp. and Amsouth Bancorporation (Oct.
19, 2006), available at http://www.usdoj.gov/atr/public/press_releases/2006/219180.pdf
(merger of Regions Financial Corp. and AmSouth Bancorporation); Press Release,
In reviewing bank mergers, the DOJ and the bank regulatory
agencies employ a well-publicized screening process.6 The process
focuses primarily on shares of deposits within geographic areas
delineated by the regional Federal Reserve banks.7 The 1202 rural
regions delineated by the Federal Reserve banks are quite narrow; 573
of them consist of a single county.8 Conversely, the 424 urban areas
delineated by the Federal Reserve banks are much broader.9 Indeed,
they are markedly broader than the relevant markets found in the
Supreme Court’s bank merger decisions of the 1960s and 1970s.10
United States v. Philadelphia National Bank11 was the seminal
Supreme Court case on the application of antitrust law to bank mergers,
and one of the seminal Supreme Court cases on the application of
section 7 of the Clayton Act12 to mergers in general.13 In that decision,
the Court observed that “[t]he factor of inconvenience localizes banking
competition as effectively as high transportation costs in other
industries.”14 The Court also explained that different bank customers do
their banking within areas of varying geographic scope, but the Court
grouped all of them together and found that a four-county area
surrounding Philadelphia represented a “workable compromise” as to
the geographic area in which banks competed.15 The Court defended
this area on the basis that the same area had been delineated as the
relevant market by the bank regulatory agencies.16 Today, however, the
Federal Reserve Bank of Philadelphia delineates a far-broader
tencounty market for that city.17
In United States v. Phillipsburg National Bank,18 the Court found
the relevant geographic market included only the Phillipsburg-Easton
area in western New Jersey, specifically rejecting the district court’s
10. See infra notes 11–18 and accompanying text (comparing two key Supreme
11. 374 U.S. 321 (1963).
12. 15 U.S.C. § 18 (2006).
13. Most significantly, Philadelphia National Bank established a presumption of
illegality for a merger that “produces a firm controlling an undue percentage share of
the relevant market, and results in a significant increase in the concentration of firms in
the market.” Phila. Nat’l Bank, 374 U.S. at 363. This presumption emerged just one
term after the Court held that “the proper definition of the market is a ‘necessary
predicate’ to an examination of the competition that may be affected by the horizontal
aspects of the merger.” Brown Shoe Co. v. United States, 370 U.S. 294, 325, 335
(1962). The Court also set out “practical indicia” for delineating the relevant market.
See Gregory J. Werden, The History of Antitrust Market Delineation, 76 MARQ. L. REV.
123, 154–58, 172–79 (1992).
14. Phila. Nat’l Bank, 374 U.S. at 358.
15. Id. at 360–61.
16. Id. at 361.
17. See Federal Reserve Bank of Philadelphia, Banking Markets, http://www.phila
delphiafed.org/files/bm/mktframe.htm (following hyperlink to Philadelphia/South Jerse
y) (last visited Mar. 11, 2008).
18. 399 U.S. 350 (1970).
inclusion of the adjoining part of Pennsylvania.19 Today, the Federal
Reserve Bank of New York includes the adjoining part of Pennsylvania
and Phillipsburg-Easton within its huge New York City metro area
market, which consists of thirty entire counties and parts of others.20
Phillipsburg National Bank is of interest, however, mainly because
it expanded on the Court’s rationale for delineating local markets by
explaining what the Court termed “[c]ommercial realities.”21 The Court
explained that the banks at issue “generally compete for deposits within
a radius of only a few miles” and that convenience is especially
important for “small customers.”22 Most importantly, the Court
observed that the merging banks’ loans were mostly quite small, and
declared that the “small borrower . . . must often depend upon his
community reputation and upon his relationship with the local
banker.”23 The Court’s rationale for the narrow geographic scope of the
relevant market is significant because small business loans have been a
major focus of concern in the DOJ’s bank merger investigations over the
past two decades.24 The Court’s rationale foreshadows economic
literature that formalized and tested this rationale when it appeared
Before proceeding further on the geographic scope of relevant
banking markets, it is necessary to consider briefly the product scope of
these markets. The Supreme Court decisions mentioned above held that
the relevant product was the entire cluster of services provided by
commercial banks.26 In contrast, since at least the early 1980s, the DOJ
has delineated relevant product markets consisting of narrower ranges of
services.27 In many of its merger investigations, the DOJ found that the
relevant product market in which the merger’s effects on competition
would be most significant was loans to small businesses or loans to
small and medium-sized business.28
The narrower markets delineated by the DOJ resulted from the
application of its 1982 Horizontal Merger Guidelines (“Merger
Guidelines”),29 which set out the basic methodology still used today for
delineating relevant markets. The Merger Guidelines articulated a
hypothetical monopolist paradigm for market delineation, which
gradually was adopted by courts in the United States and by
enforcement agencies around the world.30 As set out in the Merger
distinct relevant markets in United States v. Virginia National Bankshares, Inc., 1982-2
Trade Cas. (CCH) ¶ 64,871 (W.D. Va. 1982). The DOJ alleged that “consumer
banking” and “business banking” were two distinct relevant markets in United States v.
National Bank & Trust Co. of Norwich, 1984-2 Trade Cas. (CCH) ¶ 66,074 (N.D.N.Y.
1984). See also Eugene M. Katz, Determination of Line of Commerce for Bank
Mergers: A Contemporary View, 5 J.L. & COM. 155, 169–71 (1985).
28. United States v. Central State Bank is the first case in which the DOJ alleged a
relevant market for small business loans, and it remains the last bank merger case in
which the DOJ has litigated to judgment. 621 F. Supp. 1276 (D. Mich. 1985), aff’d, 817
F.2d 22 (6th Cir. 1987). In that case, the district court found, “as a matter of law, the
relevant market [was] the cluster of services and products that comprise the full range
of services offered by commercial banks.” Central State Bank, 621 F. Supp. at 1291–
92. Despite the fact that the district court explicitly stated that the relevant market was
“a matter of law,” the court of appeals held that the “trial court anchored its decision
upon the facts developed during the course of the trial” and that its cluster market
finding was not “clear error.” Central State Bank, 817 F.2d at 24. McCarthy
erroneously stated that the first case in which the DOJ alleged a relevant market for
small business loans was United States v. First Hawaiian, Inc., 1991-1 Trade Cas.
(CCH) ¶ 69,457 (D. Haw. 1991). McCarthy, supra note 6 at 882-83; see also ABA
SECTION OF ANTITRUST LAW, supra note 6, at 225–57 (providing a reproduction of a
report prepared by the DOJ on the competitive effects of that merger).
29. DEP’T OF JUSTICE, 1982 HORIZONTAL MERGER GUIDELINES, reprinted in 4
TRADE REG. REP. (CCH) ¶ 13,102 [hereinafter MERGER GUIDELINES]. The Merger
Guidelines were significantly revised in 1984 and 1992 and slightly revised in 1997.
See DEP’T OF JUSTICE, 1992 HORIZONTAL MERGER GUIDELINES, reprinted in 4 TRADE
REG. REP. (CCH) ¶ 13,104 (for the current version); see also ABA SECTION OF
ANTITRUST LAW, supra note 6, at 57–72; Margaret E. Guerin-Calvert & Janusz A.
Ordover, The 1992 Agency Horizontal Merger Guidelines and the Department of
Justice’s Approach to Bank Merger Analysis, 37 ANTITRUST BULL. 667 (1992)
(providing comprehensive overviews of bank mergers).
30. See Gregory J. Werden, The 1982 Merger Guidelines and the Ascent of the
Hypothetical Monopolist Paradigm, 71 ANTITRUST L.J. 253 (2003). Coincidentally, the
first litigated case in which the DOJ applied the hypothetical monopolist test was the
bank merger case United States v. Virginia National Bankshares, Inc., 1982-2 Trade
Guidelines, the hypothetical monopolist paradigm delineates the
dimensions of the relevant market through an iterative process.31
Products and areas are added one at a time until a hypothetical
monopolist over a candidate market would find it in its interest to
increase prices significantly.32 An increase of more than five percent is
generally considered significant. In this regard, price may serve as a
metaphor for all terms of trade, and for small business loans it suffices to
focus on the interest rate charged. In determining whether the relevant
market for small business loans is limited to a particular area, the
hypothetical monopolist paradigm inquires into the extent to which
small businesses served by the local banks would respond to higher
interest rates by turning to outside lenders. If a sufficient loan volume
would shift, the hypothetical monopolist would not want to increase
interest rates significantly and the relevant market, therefore, would be
larger than the local area.
Delineation of the relevant market under the Merger Guidelines
does not account in any way for the range of products the merging firms
actually sell.33 Neither does it take into account the ability of
competitors to alter what they sell through supply substitution.34 The
Merger Guidelines’ separate identification of the competitors in the
relevant market accounts for supply substitution, however.35 A firm
with no current sales in the relevant market nevertheless could be
considered a competitor in that market by virtue of its ability to quickly
Cas. (CCH) ¶ 64,871 (W.D. Va. 1982) (key issue being the geographic scope of the
31. See MERGER GUIDELINES, supra note 29, § 0.
32. See id. § 1.0.
[A] market . . . [is] a product or group of products and a geographic area in which it is
produced or sold such that a hypothetical profit-maximizing firm, not subject to price
regulation, that was the only present and future producer or seller of those products in
that area likely would impose at least a “small but significant and nontransitory”
increase in price, assuming the terms of sale of all other products are held constant.
Id. The Merger Guidelines define a “relevant market [as] a group of products and a
geographic area that is no bigger than necessary to satisfy this test.” Id.
33. See id. § 1.11 (describing the procedure for determining which products are in
the relevant market).
34. See id. § 1.0 (“Market definition focuses solely on demand substitution
factors—i.e., possible consumer responses. Supply substitution factors—i.e., possible
production responses—are considered elsewhere in the Guidelines in the identification
of firms that participate in the relevant market and the analysis of entry.”); Werden,
Tenth Anniversary Retrospective, supra note 2, at 529.
35. See MERGER GUIDELINES, supra note 29, § 1.3.
and cheaply begin selling in the market using resources currently
When many products are readily substitutable in supply and have
essentially identical competitive conditions, they are often aggregated
together as what the Merger Guidelines term a “matter of
convenience.”36 From the perspective of a small business, loans of
different amounts may be poor substitutes, but a bank can freely
substitute among loan amounts. Consequently, a range of loan amounts
could be aggregated together to form a category such as “small business
loans.”37 The relevant market delineated under the Merger Guidelines
could resemble the Supreme Court’s cluster of banking services only if
success in providing individual banking services was dependent on
providing all of the other services. As this seems highly unlikely, it is
also highly unlikely that the application of the market delineation
analysis of the Merger Guidelines could yield anything like the full
cluster of services provided by commercial banks.
The Merger Guidelines also introduced the concept of a price
discrimination market,38 in which a relevant market can be delineated
not just on the basis of the characteristics of products or services, but
also on the basis of the characteristics of the particular customers to
which they are provided.39 The Merger Guidelines permit a separate
market to be delineated for loans to small businesses if financial
institutions can and do lend to them on different terms than to other
borrowers.40 One way or another, application of the market delineation
36. See id. § 1.32 n.14; Werden, Tenth Anniversary Retrospective, supra note 2, at
37. See ABA SECTION OF ANTITRUST LAW, supra note 6, at 36–37 (giving
examples of what actually has been done); Guerin-Calvert & Ordover, supra note 29, at
38. See MERGER GUIDELINES, supra note 29, §§ 1.12, 1.22.
39. See id. § 1.0.
40. See id. § 1.12.
Existing buyers sometimes will differ significantly in their likelihood of switching to
other products in response to a “small but significant and nontransitory” price
increase. If a hypothetical monopolist can identify and price differently to those
buyers (“targeted buyers”) who would not defeat the targeted price increase by
substituting to other products in response to a “small but significant and
nontransitory” price increase for the relevant product, and if other buyers likely would
not purchase the relevant product and resell to targeted buyers, then a hypothetical
monopolist would profitably impose a discriminatory price increase on sales to
methodology set out in the Merger Guidelines almost certainly leads to
the conclusion that loans to small businesses constitute a relevant
market. Moreover, abandoning the cluster concept eliminates the need
for the “workable compromise” of Philadelphia National Bank. That
decision correctly observed that the geographic area within which a
customer obtains banking services depends on the customer and the
service.41 In applying the approach of the Merger Guidelines, one can
focus just on loans to small businesses.
Return now to Phillipsburg National Bank’s notion that its
“relationship with the local banker” is important for a small business.42
Economic literature appearing long after that case was decided also
focused on the relationship between a small business and its local
bank.43 This literature posited that the creditworthiness of a small
business is evaluated by a local bank on the basis of “soft” information
often acquired through a banking relationship.44 Soft information is
contrasted with hard information in financial statements. The hypothesis
put forward was that hard information on small businesses is either
lacking or is less useful in evaluating creditworthiness than the soft
information lenders acquire through meeting business persons
face-toface, visiting their places of business, and providing them with other
banking services such as checking.45 It was also hypothesized that soft
information is accumulated gradually over time through long-term
To the extent that soft information is important, it follows that
distant lenders either cannot accurately evaluate a small business’s
creditworthiness or can do so only at a much higher cost than a local
bank. Consequently, a small business either would be unable to borrow
from a distant lender or would be able to do so only on unfavorable
terms that reflect the added default risk arising from the lack of good
information on creditworthiness. Two studies empirically examined the
importance of soft information as of the late 1980s with data derived
from a survey of small businesses.47 Both found clear indications that
soft information was important. All else being equal, one study found
that the interest rate for a line of credit was significantly lower when a
borrower had a longer relationship with its lender.48 The other study
found that a greater availability of credit was associated with a longer
relationship.49 Both studies lent support for the notion that relevant
markets were local.
The foregoing economic literature supports only the proposition
that relevant markets for small business loans were narrow in geographic
scope back in the 1980s. Patterns of small business lending have
changed quite a bit since then, and small businesses have increasingly
turned to distant lenders for some of their borrowing. A 1993 survey of
small businesses found that the median distance between a business and
its bank was just four miles, but some long-distance lending brought the
average distance up to 43 miles.50 The survey also inquired about the
non-bank institutions with which the small businesses had financial
relationships and found that the average distance between the small
business and the non-bank financial institution with which it had a
relationship was 251 miles.51 Analysis of the data from the survey
indicated that the distance between the businesses and their financial
institutions was significantly greater the more recently the relationship
was entered into. The average distance between the small business and
its bank was 16 miles for relationships entered into in the 1970s, but 68
miles for relationships entered into in the 1990s.52 Similar data from a
1998 survey indicated that the average distance between a small
business and its lender more than doubled between 1993 and 1998.
study analyzing the 1993
data concluded that improvements in
information technology reduced the disadvantages faced by more distant
Many of the improvements in information technology were not
specific to the financial sector. They include the use of personal
computers, spreadsheet programs, and the Internet. However, one
important innovation uniquely affecting the financial sector was the use
of credit scoring—a systematic method for transforming available hard
information into a single number predictive of the default risk associated
with a loan.55 Credit scoring was first applied to individuals and then to
small businesses. Fair Isaac Corporation pioneered credit scoring in the
1970s and introduced a small business credit scoring model in 1993.56
Credit scoring offered lenders an alternative, which many adopted,
to reliance on soft information. An analysis of data from a 1997 survey
of large banks found that the adoption of credit scoring led to a
significant increase in lending to small businesses, which was attributed
to a reduction in information costs.57 Studies have also concluded that
the use of credit scoring led to increased lending to distant small
business borrowers.58 One study found that the bulk of the increase in
distant small business lending between 1996 and 2001 was accounted
for by banks that were significant issuers of credit cards and,
consequently, experienced in the use of credit scoring.59
These developments and the resulting changes in small business
borrowing patterns might suggest that the relevant markets for small
business loans have expanded significantly in geographic scope and
might even be national. Although the available information does not
eliminate all doubt, my perception is that developments in small
business lending most likely have not broadened the geographic scope of
the relevant markets.
To understand why this is so, one must appreciate that what matters
is not the loans local banks no longer make, but rather the loans they still
do make. Applying the hypothetical monopolist paradigm of the Merger
Guidelines,60 one asks whether a hypothetical monopolist over a
candidate banking market would find it profitable to significantly
worsen the terms on which it provides its services. For a hypothetical
monopolist over small business loans in some local area, one would ask
whether an increase in interest rates on such loans would cause a
sufficiently large loan volume to shift to lenders outside the area to
dissuade the hypothetical monopolist from imposing the increase. The
characteristics of the loans actually made in the candidate market clearly
are what matter in determining the loan volume that would shift outside
the local area. The loans those banks do not make, for whatever reason,
have no affect on the amount by which a hypothetical monopolist would
want to raise interest rates.
The economic evidence appears to paint a picture in which
innovation has shifted relatively small loan volume away from local
banks, leaving local banks with the loans for which they continue to
have a significant advantage due to their proximity to the borrower.
Data collected under the Community Reinvestment Act indicate that in
2001, out-of-area banks accounted for just 12% of the small business
lending volume in urban areas and just 17% in rural areas.61 The
respective figures for the number of loans were 55% and 40%.62 This
discrepancy is explained by the fact that out-of-area banks use credit
scoring for what is sometimes termed “micro–business lending,” in
59. See Timothy H. Hannan, Changes in Non-Local Lending to Small Business, 24
J. FIN. SERVS. RES. 31, 37, 45 (2003).
60. See supra notes 29–40 and accompanying text.
61. Hannan, supra note 59, at 37.
which the loan amount may be limited to as little as $100,000.63 Thus,
distant banks appear to compete primarily for the smallest business
Recent studies also indicate that distant lenders using credit scoring
suffer from a significant informational disadvantage. One study
examined loans guaranteed by the Small Business Administration.64
Among its findings were that, holding distance constant, the default rate
was 23% higher for loans made by banks using credit scoring.65 In
addition, the default rate was 22% higher on loans made to borrowers
more that fifty miles from a bank than on loans made to borrowers less
than twenty-five miles from the bank.66 A second study was based on
reports which banks in nine selected metropolitan areas filed under the
Community Reinvestment Act.67 It found that the average distance
between the small business borrower and the relevant branch was only
about three miles.68 It also found that greater distance made banks,
especially small banks, significantly less inclined to lend.69 The study
concluded that the loans banks still make to local small businesses are
loans for which soft information is important and, hence, distant lenders
are not significant competitors.70 A final study examined yields realized
by commercial banks on business loans of all sizes between 1996 and
2001.71 It found that smaller banks, which made smaller loans, had
significantly higher risk-adjusted yields on their business loans, other
things being equal.72 The study attributed the higher yield for smaller
banks to the informational advantages associated with proximity and
There may be a need to fine-tune the product dimensions of the
relevant market to better focus on the characteristics of the loans local
banks still make, but it seems most likely that banks still compete to
make small business loans within narrow geographic radii. Moreover,
that will likely remain true well into the future. This appears to be
especially true in rural areas, where the Federal Reserve banks delineate
the narrowest markets.74 Rural areas are of special interest because the
banking industry is most highly concentrated in rural areas,75 so mergers
are most likely to raise serious antitrust concerns in those areas.
Moreover, rural areas tend to be served by small banks,76 and substantial
empirical evidence indicates that small banks rely on soft information
much more than larger banks.77 Finally, it appears small banks remain
economically viable,78 so they can be expected to be around for many
years to come. Thus, my perception of the future is that bank mergers,
especially in rural areas, most likely will continue to be properly
analyzed within local relevant markets.
19. Id . at 362-65.
20. Federal Reserve Bank of New York, Banking Markets, http://www.ny.frb.org/ banking/ma_bankingmarkets. html (last visited Mar . 11 , 2008 ).
21. Phillipsburg Nat'l Bank , 399 U.S. at 362.
22. Id . at 363.
23. Id . at 364.
24. See , e.g., ABA SECTION OF ANTITRUST LAW, supra note 6 , at 36; Robert Kramer , Address before the Antitrust Section of the American Bar Association (Apr . 14, 1999 ), available at http://www.usdoj.gov/atr/public/speeches/214845.pdf; Constance K. Robinson, Address before the 31st Annual Banking Law Institute (May 30 , 1996 ), available at http://www.usdoj.gov/atr/public/speeches/1003.pdf.
25. See infra notes 43-74 and accompanying text.
26. See Phillipsburg Nat'l Bank , 399 U.S. at 359-61; United States v. Phila. Nat'l Bank , 374 U.S. 321 , 356 ( 1963 ).
27. The DOJ alleged that “retail banking” and “wholesale banking” were two
41. United States v. Phila. Nat'l Bank , 374 U.S. 321 , 360 - 61 ( 1963 ).
42. United States v. Phillipsburg Nat'l Bank & Trust Co ., 399 U.S. 350 , 364 ( 1970 ).
43. See Allen N. Berger & Gregory F. Udell , Small Business Credit Availability and Relationship Lending: The Importance of Bank Organizational Structure, 112 ECON . J. F32, F32, F38 - F39 ( 2002 ) [hereinafter Berger & Udell , Bank Organizational Structure]; Allen N. Berger & Gregory F. Udell , Relationship Lending and Lines of Credit in Small Firm Finance , 68 J. BUS. 351 , 351 - 52 , 354 - 55 ( 1995 ) [hereinafter Berger & Udell , Small Firm Finance]; Mitchell A. Petersen & Raghuram G. Rajan , The Benefits of Lending Relationships: Evidence from Small Business Data, 49 J. FIN. 3 , 5 - 6 ( 1994 ) [hereinafter Petersen & Rajan , Benefits of Lending].
44. See Berger & Udell, Bank Organizational Structure, supra note 43 , at F33- F38; Peterson & Rajan, Benefits of Lending, supra note 43, at 5.
45. See Berger & Udell, Bank Organizational Structure, supra note 43 , at F37 ; Petersen & Rajan, Benefits of Lending, supra note 43, at 6.
46. See Berger & Udell, Bank Organizational Structure, supra note 43 , at F32 , F34, F37; Petersen & Rajan, Benefits of Lending, supra note 43, at 5-6.
47. See Berger & Udell, Small Firm Finance, supra note 43; Petersen & Rajan, Benefits of Lending, supra note 43.
48. See Berger & Udell, Small Firm Finance, supra note 43 , at 377-78.
49. See Petersen & Rajan, Benefits of Lending, supra note 43, at 34.
50. See Mitchell A. Petersen & Raghuram G. Rajan , Does Distance Still Matter? The Information Revolution in Small Business Lending , 57 J. FIN. 2533 , 2537 ( 2002 ).
51. See id.
52. Id .
53. See Kenneth P. Brevoort & Timothy H. Hannan , Commercial Lending and Distance: Evidence from Community Reinvestment Act Data, 38 J. MONEY, CREDIT & BANKING 1991 , 1993 ( 2006 ) (citing an unpublished memorandum written by employees of the Federal Reserve Board) .
54. Petersen & Rajan, Benefits of Lending, supra note 43.
55. See Loretta J. Mester , What's the Point of Credit Scoring? , BUS. REV. , 3 - 4 (Sept./Oct. 1997 ).
56. Fair Isaac Corporation provides a description of the latest small business model . Fair Issac Corp ., http://www.fairisaac.com/NR/rdonlyres/30FB9F27-E88B4DB5 - A19F-13A76241F82F/0/SBSS_6_PS.pdf (last visited Mar . 11 , 2008 ).
57. See W. Scott Frame , Aruna Srinivasan & Lynn Woosley , The Effect of Credit Scoring on Small-Business Lending, 33 J. MONEY, CREDIT & BANKING 813 ( 2001 ).
58. See Allen N. Berger , W. Scott Frame & Nathan H. Miller , Credit Scoring and the Availability, Price and Risk of Small Business Credit, 37 J. MONEY , CREDIT & BANKING 191 ( 2005 ); W. Scott Frame, Michael Padhi & Lynn Woosley, Credit Scoring and the Availability of Small Business Credit in Low- and Moderate-Income Areas , 39 FIN. REV. 35 ( 2004 ).
63. See Robert DeYoung , William C. Hunter & Gregory F. Udell , The Past, Present, and Probable Future for Community Banks, 25 J. FIN. SERVS. RES . 85 , 96 ( 2004 ).
64. Robert DeYoung , Dennis Glennon & Peter Nigro , Borrower-Lender Distance , Credit Scoring, and the Performance of Small Business Loans (FDIC Ctr . for Fin. Research, Working Paper No. 2006 - 04 , Mar. 2006 ), available at http://www.fdic.gov/ bank/analytical/cfr/2006/wp2006/CFRWP_ 2006 _04_DeYoungGlennonNigro.pdf.
65. Id . at 32.
66. Id .
67. Brevoort & Hannan, supra note 53.
68. Id . at 2000 .
69. Id . at 2006 .
70. Id . at 2006- 07 .
71. David A. Carter , James E. McNulty & James A. Verbrugge , Do Small Banks Have an Advantage in Lending? An Examination of Risk-Adjusted Yields on Business Loans at Large and Small Banks , 25 J. FIN. SERVS. RES . 233 ( 2004 ).
72. Id . at 249-50.
73. Id . at 250.
74. See supra notes 8-10 and accompanying text.
75. See Tim Critchfield et al., The Future of Banking in America-Community Banks: Their Recent Past, Current Performance, and Future Prospects, 16 FDIC BANKING REV. 1 , 10 ( 2004 ) (reporting that in 2003 the average deposit HHI in rural markets was 3671, while in three other categories of more populous areas it was less than 1600).
76. See id. (reporting that in 2003 community banks accounted for 53% of the deposits held by FDIC-insured institutions in rural areas).
77. See Allen N. Berger et al., Does Function Follow Form? Evidence from the Lending Practices of Large and Small Banks , 76 J. FIN. ECONS. 237 ( 2005 ) ; Rebel A . Cole, Lawrence G. Goldberg & Lawrence J. White , Cookie Cutter vs . Character: The Micro Structure of Small Business Lending by Large and Small Banks , 39 J. FIN . & QUANTITATIVE ANALYSIS 227 ( 2004 ) ; Jonathan A. Scott, Small Business and the Value of Community Financial Institutions, 25 J. FIN . SERVS. RES . 207 ( 2004 ).
78. See DeYoung , Hunter & Udell, supra note 63.