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Looking For Capital? Don't Forget About the Little Bank That Could.


Don’t overlook that little guy that keeps chugging right along.

If you are looking for money to launch or grow your business, like a moth drawn to a light, it can be easy to go straight for the biggest banks in town -- the Citibanks, the Chases, the Bank of Americas. But don’t forget to seek out the local community bank. More than likely, there is one in your town.

There are more community banks today than there were 30 years ago, according to a report released today by the Federal Deposit Insurance Corporation. The number of institutions in the U.S. with assets between $100 million and $10 billion, most of which the FDIC considers community banks, have increased both in number and total assets since 1985.

The number of banks at the smaller end of that range – banks with $100 million to $1 billion in total assets – increased by 7 percent between 1985 and 2013, while their assets jumped 27 percent. The slightly larger subset of community banks – those banks with between $1 billion and $10 billion in total assets -- increased 5 percent in the same period, according to the FDIC report. Their assets edged up 4 percent during that time.

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The relatively slow and steady progression of this category of Main Street banks comes against a backdrop of real industry turmoil. Banks with less than $100 million in assets have hemorrhaged in the last three decades: 85 percent closed their doors between 1985 and 2013. And while the itty-bitty banks have been slashed, the biggest banks on the block have been getting stronger and stronger: The number of banks with more than $10 billion has multiplied three times over in the past three decades and the assets held by those big banks has jumped 10 times over.

When a community bank closes its doors, almost two out of three times, it’s because another community bank has taken it over, the FDIC report says. The result is that the so-called “community bank” sector has actually gotten more robust in recent history.

"The FDIC study clearly demonstrates the strength and resilience of the community bank sector and supports the conclusion that community banks will continue to play a vital role in the financial system of the United States for the foreseeable future," said FDIC Chairman Martin J. Gruenberg, in a statement.

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While the report does not indicate that community banks are going to be lending more, the strength of the sector is good news for Main Street businesses, as community banks are critical lenders in small towns. “Community banks tend to focus on providing essential banking services in their local communities. They obtain most of their core deposits locally and make many of their loans to local businesses. For this reason, they are often considered to be ‘relationship’ bankers as opposed to ‘transactional’ bankers,” the FDIC report says. Community banks are often positioned to be more successful lenders to small-businesses than large banks because local bankers know the town they are located in and the people who live there.

As such, community banks hold a disproportional percentage of small-business loans than their larger counterparts. At the end of 2012, community banks kept 14 percent of the assets managed by the banking industry overall but were managing 46 percent of the small loans dispersed to farms and businesses, the FDIC report said. In roughly 600 U.S. counties, or about one in five counties across the country, there would be no physical branch of a bank if it were not for the local community bank in town.

“This report points to the fact that even after more than 30 years of industry consolidation community banks continue to serve as vital sources of credit for small businesses and providers of banking services to communities that might not be served by non-community banks,” said John Buhrmaster, president of 1st National Bank of Scotia, N.Y., and chairman of the Independent Community Bankers of America (ICBA), and Camden R. Fine, the ICBA's president and CEO, in a joint statement released today. “The evidence strongly suggests that community banks will continue to carry out these important functions for years to come for the benefit of small businesses, consumers and communities nationwide.”

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Catherine Clifford

Written By

Catherine Clifford is senior entrepreneurship writer at CNBC. She was formerly a senior writer at, the small business reporter at CNNMoney and an assistant in the New York bureau for CNN. Clifford attended Columbia University where she earned a bachelor's degree. She lives in Brooklyn, N.Y. You can follow her on Twitter at @CatClifford.