Betting on Commercial Real Estate: Competition in Deposit Markets
type: CreativeWork
description: We show that community banks operating in competitive deposit markets increase their exposure to commercial real estate. Facing rising funding costs and higher beta deposits, these banks shift toward higher-yield and lower duration assets to preserve profit margins and duration match. We test this hypothesis using an exogenous increase in competition from credit unions following a policy change. As certain credit unions begin competing with regional and community banks, branches increase their deposit rates to stay competitive. The banks respond by expanding mortgage origination, both in the number of loans and their total value.
abstract: We show that community banks operating in competitive deposit markets increase their exposure to commercial real estate. Facing rising funding costs and higher beta deposits, these banks shift toward higher-yield and lower duration assets to preserve profit margins and duration match. We test this hypothesis using an exogenous increase in competition from credit unions following a policy change. As certain credit unions begin competing with regional and community banks, branches increase their deposit rates to stay competitive. The banks respond by expanding mortgage origination, both in the number of loans and their total value.
author: Peeters, Jonas
language: en
keywords: Finance and Financial Management
date published: 2025
date modified: 2026-07-24T03:46:32Z
provider: University of Pennsylvania
publisher: Networked Digital Library of Theses and Dissertations
type: WebPage
source organization: University of Pennsylvania