Community bank liquidity: Natural disasters as a natural experiment

Kyle D. Allen, Matthew D. Whitledge, Drew B. Winters

Research output: Contribution to journalArticlepeer-review

Abstract

We examine how community banks respond to liquidity shocks created by natural disasters. We address community banks’ responses to liquidity shocks due to their focused geographic and economic presence, which coincide with their communities’ exposure to the disasters and the ability of the local banks to meet their needs. We find that community banks respond to liquidity shocks by managing their balance sheet, rather than any single balance sheet account. In particular, we find that they respond to the liquidity needs of their communities by increasing loans as deposits are withdrawn.

Original languageEnglish
Article number101002
JournalJournal of Financial Stability
Volume60
DOIs
StatePublished - Jun 2022

Keywords

  • Community bank
  • Liquidity
  • Natural disaster

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