3c hapter - Index of

68 Locavesting
The community bank business model has held up well compared
to the megabank model that had to be propped up by taxpayers,
Hoenig added. Community banks had higher capital ratios, for
example, and have better served their communities. “If allowed
to compete on a fair and level playing fi eld, the community bank
model is a winner,” he concluded. 6
That’s a big “if.” In an age of megabank effi ciency and power,
the traditional community bank model is under threat. Decades
of consolidation and other changes in the banking industry have
taken a toll on our hometown fi nancial institutions.
The number of single- branch banks in the United States has
plummeted from more than 10,000 in 1966 to about 2,000 today.
Banks with less than $1 billion in assets today hold just 15 percent
of national deposits, down from 28 percent in 1995. The top four
largest banks—each with greater than $100 billion in assets—have
grown in the same timeframe from 7 percent of all deposits to
44 percent. And those Too Big to Fail banks have emerged from
the crisis even bigger: The top four banks added as much market
share in 2009 as they had in the previous decade, according to the
New Rules Project. 7
Community Bank
Community banks are typically defi ned as banks with less than
$1 billion in assets, although many have less than $250 million in
assets. The real distinction is that they are locally owned and focused
on serving the businesses and families in their geographic region.
Small business lending has traditionally been the bread and butter of
many community banks.
That doesn’t bode well for small businesses that rely on bank
loans. As a 2007 study noted, “Credit access in markets dominated
by big banks tends to be lower for small businesses than in markets
with a relatively larger share of small banks.” 8