The second and third columns of Panel A of Table 3 present the results of our test of H2 that the effect of the capital crunch differs for small versus large firms. We show that the capital crunch (i.e., positive coefficient on Capital R1nRecession) occurs only for banks with total assets in excess of $500 million. For these banks the effect of capital on lending growth during recessions is significantly higher than during non-recessionary periods. This finding differs from the findings in the prior literature examining pre-FDICIA data. In contrast to the effect of capital, we find that deposits are significant in explaining loan growth for both small and large banks