Community banks are aggressively lobbying Congress fearing that Basle III capital requirements and the many new regulations required per the Dodd/Frank Act will seriously impact their profitability. This hearing focused on a recently released Community Banking Study conducted by the FDIC. Among the major findings is that in 2011 community banks held 14% of banking industry assets but were responsible for as much as 45% of the industry small-denomination loans to farmers and businesses.

As for regulatory burden, the FDIC concluded that measuring the effects of regulations remains a substantive challenge.The witnesses said no one regulation or practice had a significant effect on their institutions. Rather, it was the cumulative effect of all regulatory requirements that weighted down their institutions.

FDIC and GAO witnesses made up the only panel. The GAO representative referred to a recent GAO report on the issue of the failures and consolidations with the community bank community. GAO found rising levels of non-performing loans, particularly acquisition, development and  construction loans, appears to be the key factor in the failure of community banks between 2008 and 2010 in the 10 states the GAO surveyed.