ABA Bank Index
The ABA Bank Index is a stock index comprised of community and regional banks. Other ABA indices include the NASDAQ OMX ABA Community Bank Index and the ABA NASDAQ Community Bank Total Return Index. The others are the NASDAQ OMX ABA Community Bank Index (ABQI) and the ABA NASDAQ Community Bank Total Return Index (XABQ). The ABA Bank Index, short for the ABA NASDAQ Community Bank Index, is co The ABA Bank Index is a stock market index that tracks publicly traded community and regional banks.
What Is the ABA Bank Index?
The ABA Bank Index is a stock index comprised of community and regional banks. The American Bankers Association (ABA) helped create the index to represent smaller institutions within the banking industry, in contrast to the KBW Banking Index that tracks larger banks. The ABA Bank Index is published on the Nasdaq under the symbol ABAQ.
Understanding the ABA Bank Index
The ABA Bank Index, short for the ABA NASDAQ Community Bank Index, is co-sponsored by the American Bankers Association, the trade association and lobbying arm of the U.S. banking industry. The ABA represents community, regional and large national banks that together hold about $17 trillion in deposits and have issued more than $11 trillion in loans.
The association created the ABA Index in 2003 to publicize the community banking industry. Two versions of the index are calculated for total return and price return. The ABAQ is weighted according to market capitalization and consists of more than 300 community banks.
ABAQ is one of three branded ABA indices. The others are the NASDAQ OMX ABA Community Bank Index (ABQI) and the ABA NASDAQ Community Bank Total Return Index (XABQ). ABQI, launched in 2009, tracks the most actively traded community banks in the ABAQ. Investors can gain exposure to the ABQI through the First Trust Nasdaq ABA Community Bank Index Fund (QABA). XABQ is the ABA's total return index, the performance of which includes both price appreciation and reinvestment of all cash distributions paid by index constituents.
Importance of the ABA Bank Index
Community banks play important functions in supporting local economies across the United States. Most provide commercial lending geared to small and mid-market businesses, as well consumer loans, mortgages and deposit accounts. The community bank industry has been undergoing consolidation for many years, with the number of independent banks falling every year. This has allowed the remaining banks to take advantage of economies of scale to lower costs and deliver services more efficiently.
As investments, small and mid-sized banks have several catalysts working in their favor. In 2016, the Federal Reserve began raising short-term interest rates, which boosted net interest margins at banks, but this reversed course in early 2020 as the Fed lowered rates.
American Bankers Association (ABA)
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