Amid financial crisis, community banks demonstrate their worth

Hence, in the decade ahead look for the continuance of a trend that started to take hold as the financial crisis intensified: the revival of the community bank.

Community banks may not have all the 'bells and whistles' – such as a fully-modernized online banking service or mobile banking - of the large banks, but in just about every other way, they meet or exceed the service of large banks. There's something reassuring about being able to call up the manager of local bank and speak to someone you know, who's also familiar with the community you live in.

Another benefit: community banks tend to expand slowly and only after researching a new branch area carefully. There's something jarring and discordant about seeing 'XYZ National Bank' make a major marketing push into an area with the opening of 10 area branches....only to see most or all of them close a few years later during a merger or acquisition, or, as occurred during the financial crisis, in the case of insolvency.

And another reason community banks are more stable: they tend to retain the mortgages and related loans they make. They're managing/servicing those loans in-house – they aren't 'sold and shipped out' to a wholesaler or other 'bundler of loans.' In other words, the bulk of the mortgage's risk remains with the community bank. And, all other factors being equal, one has to think that a bank has to look at a loan on its books differently than one it knows it's going to sell to another party.