Thesis_gd_final_vers.. - Vernimmen

ely more on alternative funding sources than safe ones, and this difference stays statistically
significant when bankruptcy gets close, whereas we would have expected this alternative funding
to dry up and disappear as financial distress increases. We do not have any information on FHLB
advances, which may be included in this alternative funding sources, because this information is
not publicly available. Several researchers pointed out the growing importance of FHLB advances
as a funding source at small and community banks. For some banks, FHLB advances represented
up to 20% of their total liabilities and were used to increase the volume of loans issued. With
brokered deposits, FHLB advances are considered as non-risk priced non-core funding. Indeed
interest rates paid either on deposits or on FHLB advances are only partially correlated to the
riskiness of assets, which might have given failed banks the possibility to finance riskier assets
without increasing their funding cost consistently with their risk-level.
Table 10: Univariate tests of equality of the means between failed and safe banks (6/6)
Variable
Quarter
failed
banks
Ratio for
failed banks
Ratio for safe
banks
Difference of
means
t-statistic
ln_ta Q4 2006 174 12.49 11.84 -0.65 (-6.24)***
Q2 2007 177 12.55 11.83 -0.72 ( -6.80)***
Q2 2008 172 12.70 11.89 -0.81 (-7.64)***
Q1 2009 136 12.63 11.96 -0.67 (-5.66)***
growth Q4 2006 174 30.02% 11.20% -18.82% (-10.65)***
Q2 2007 177 22.95% 11.23% -11.72% ( -6.66)***
Q2 2008 172 15.95% 12.24% -3.71% (-2.13)**
Q1 2009 136 1.65% 11.37% 9.72% (4.72)***
Variable
Quarter to
failure
failed
banks
Ratio for
failed banks
Ratio for safe
banks
Difference of
means
(t-statistic)
ln_ta 1 140 12.66 11.76 -0.91 (-7.88)***
4 140 12.70 11.76 -0.94 ( -6.80)***
6 140 12.66 11.75 -0.90 (-7.84)***
12 134 12.41 11.75 -0.66 (-5.63)***
growth 1 140 0.30% 11.28% 10.99% (5.99)***
4 140 17.45% 11.28% -6.17% (-3.36)***
6 140 20.74% 12.24% -8.50% (-5.13)***
12 134 36.36% 11.22% -25.15% (-13.17)***
lag4_growth 1 140 20.95% 11.43% -9.52% (-5.21)***
4 140 23.25% 11.41% -11.83% (-6.34)***
6 140 29.93% 11.39% -18.54% (-9.80)***
12 134 31.41% 11.32% -20.09% (-10.18)***
*, **, *** indicate statistical significance at 10, 5 and 1 percent levels, respectively.
2-sided t-test using different variances for the two sub-samples.
Our findings on failed banks size contradict our hypothesis that failed banks are on average
smaller than safe banks. On the contrary they are significantly larger. The growth rate of total
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