A comprehensive study of Alabama’s banking industry released by researchers in Auburn University’s Raymond J. Harbert College of Business reveals that state banks issued $14 billion in small business loans by the end of the third quarter of 2015 and consider regulatory uncertainty and cyberattacks as being among the chief threats to their business model.

The report, “Alabama Banking: The State of the State’s Banking Industry,” examines the condition and performance of the state’s banks through the third quarter of 2015 and also incorporates data from 2000 to 2015. The study, co-authored by finance professors James Barth, Jitka Hilliard, John Jahera, and doctoral student Yanfei Sun, also outlines policy suggestions aimed at helping state banks better serve their customers. Among the study’s findings:

• Alabama banks rank 40^th nationally in aggregate return-on-assets (ROA) with $253 billion in total assets
• Alabama banks generated $169 billion in individual and business loans as of the third quarter of 2015
• Alabama banks provided $14 billion in small business loans (third quarter, 2015)
• More than 386,000 small businesses in the state created more then 24,800 net new jobs as of 2012 (based on the most recent data available)
• Of the 131 banks headquartered in Alabama, all but eight are defined as “small” or “community” banks with less than $1 billion in assets

The co-authors also found that 88 percent of state bankers consider “regulatory burden” to be the biggest threat to their business model. “Political and regulatory uncertainty” were cited by 78 percent of respondents as a “major impediment” to operations and performance. The study’s co-authors say the banking industry is still coping with “a triple whammy: the impacts of the financial crisis on credit, the juggernaut of regulatory reforms, and competition in a field that reinvents itself at breathtaking speed.”

“We had major regulatory action in 2010 with Dodd-Frank and bankers have been bemoaning that ever since,” said Jahera, Lowder Professor of Finance. “From the bankers’ point of view, it added a lot of cost in terms of regulatory compliance.”

Seventy-three percent of bankers reported that their primary competitive threat comes from “non-bank” financial firms, which are subject to fewer regulations, while 70 percent of respondents view vulnerability to cyberattacks as a “serious concern.”

The researchers suggested an overall easing of regulations to enable banks to serve “underbanked or non-banked” consumers through short-term loans at lower rates than those offered by payday lenders. They also proposed that the “harmful effects” of the Dodd-Frank Wall Street Reform and Consumer Protection Act be examined in view of the fact that recent regulations have increased costs for banks but not revenues. The researchers also called for the state Department of Banking to explore options to ease regulatory burden and associated costs for state-chartered banks.