Texas Tech University

Researchers Warn Community Banks Are 'Dying Out' Just When Needed Most

By: Glenys Young 

Ironically, the big banks, Mauldin notes, are not eager to see the community banks die out – far from it.

"We need banks of all sizes to function," he said. "I've known so many of the guys who run the largest banks in the country, and they'll be the first to say we have to have our community bank system."

The Federal Deposit Insurance Corp. (FDIC) has a list of institutions it recognizes as community banks, but it's not as obvious as it may sound. It's not as simple as large corporations vs. a small, family-owned bank. Instead, Winters breaks it into transaction banks vs. relationship banks.

"Big banks are transaction banks; they do lots of transactions, they do them with credit scoring, they do models, they do them remotely and all this kind of stuff," Winters said. "My dad was a community banker. He watched his loan portfolio by having breakfast every morning at the local watering hole. That's relationship banking.

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