House Refinance Center
About Community Banking
Growth And
Benefits Of
Community
Banking
The number of community banks is
growing. There are over 7,000 community
banks with 50,000 locations across
America. Even in the current economic
downturn, the US added 31 new
community banks in 2009. So why all the
fuss about community banks?

The big banks contributed to the growth.
They opened the customers' eyes and we
finally realized that there were good
alternatives. These alternatives offered
better service and lower fees for checking
and other depository services.

There are several benefits to dealing with
a community bank. The primary benefit is
that customers can get direct access to
decision makers. These officers of the
bank are usually deeply involved in local
community events and affairs. This makes
it easier for a customer to meet and
speak with a bank official after regular
bank hours and at different venues.

Community banks take the resources of
the community and redirect the same
resources to local businesses and
families. For example, deposits from local
customers and businesses are loaned to
families in the form of mortgages,
personal loans and student loans. The
money is not sent to a different state as is
the common practice with mega banks.

Another benefit of a community bank is
the willingness to consider an applicant's
character, family and banking history
when making a home loan. A large bank
has an underwriting department that uses
a formula, and various financial ratios to
approve a borrower and the department
might be in another state.

Like all banks across the country,
community banks are fighting for survival.
They need to survive! Whole communities
depend on them.

The Dodd-Frank Act which was passed
last July is promising to work well for
community banks. The new changes will
be a bit cumbersome for the large banks.
Community Banks
Fighting To Stay
Open
With many of the mega-banks reeling
from the foreclosure mess, fraudulent
documents and robo-signing, community
banks have launched an all out attack to
get customers away from the big banks.

The reason customers are moving to the
community banks is trust. Customers trust
the management and the employees.
They feel that their financial well being will
be protected. A February 2009 survey by
the Independent Community Bankers of
America (ICBA) revealed that new
customers contributed to an increase in
deposit accounts at 55% of community
banks.

While much of the economic recovery has
been focused on ensuring that the big
banks remain profitable and stable, in
Washington it is community banks that is
the focus of attention. They have a more
direct connection to the constituency of
lawmakers. Of the nearly 8,000 banks in
the US, most of them are small, with
assets under $10 billion.

I would not envy a community banker. On
one hand he is fighting the big banks for
customers and market share, while on the
other hand he is fighting Washington over
reforms and regulations. Many community
banks use GSE loan products. If Fannie
Mae and Freddie Mac are privatized or
somehow changed drastically, a bulk of
their loan portfolio will disappear.

This move gives the advantage to the
mega-banks. They have a much easier
time raising capital on Wall Street than
the community bank in Kalamazoo. As it
is now the three mega lenders that have
55% market share will continue to
increase their dominance.
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