What is the 'ABA Bank Index'

The ABA Bank Index is a banking index that comprises community banks and banking institutions. The ABA helped create the index to represent the smaller institutions of the banking industry, in contrast to the KBW Banking Index that tracks larger banks. The ABA Bank Index trades on the Nasdaq under the symbol ABAQ.


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 local community banks, regional banks and large national banks that hold approximately $17 trillion in assets, hold deposits of $13 trillion and make over $10 trillion worth of loans. The ABA Index was created in 2003 to publicize the community banking industry and is computed for both total and price return. The ABAQ is also designed to aid in improved market liquidity and more equitable market valuations. ABAQ is weighted according to market value and consists of 325 community banks.

ABAQ is one of three branded ABA indexes. 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 returns of 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 U.S. Most provide commercial lending geared to small and mid-market businesses as well consumer loans, including mortgages, as well as 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. Since 2016, the Federal Reserve has been raising short-term interest rates at a steady pace, which boosts banks’ net interest margins. The industry is also benefiting from reduced regulation, which lowers compliance costs; tax savings from 2017 corporate tax reform; as well as accretive mergers & acquisitions. An expanding U.S. economy has also been supportive of healthy loan growth. In addition to these drivers of stock price appreciation, many community banks pay a regular dividend.

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