Although community banks make up the majority of banks in the
United States, they might be an endangered species. Will these
little institutions and the exchange traded fund (
) that tracks them go the way of the dodo bird?
Federal Reserve official Thomas Hoenig stated this week that
"Too Big To Fail" banking institutions threaten the viability of
. Community banks are a cornerstone of local and regional economies
- accounting for all but 83 banks in the United States - so it's a
threat that should be taken seriously,
says the Huffington Post
. Community banks are banks with less than $10 billion in assets. [
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If these banks were to disappear, it would be a loss. Hoenig
says they've held up well compared to the behemoth bank model and
they have a far more vested interest in local economies. They have
also done more lending - in the last year, they have increased
total loans by 2% while big bank loans have decreased 6%. Business
lending is stronger, too: for small banks, it declined 3%; for big
ones, it fell 21%.
So, what is in the future of community banks? It's up in the
But Dory Rand for MarketPlace seems
to agree with Hoenig: they're important. They make small business
loans and financing available to the middle class. These are
generally areas that big banks are less willing to dabble in and
may not even consider. [
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Rand also points out that a community bank is based in the
community. People are comfortable going there. There's more
relationship-based banking. They know what the community needs are
and they direct their products and services to meet those needs at
an affordable, sustainable level.
Can community bank continue to thrive? It's a wait-and-see
moment, but for the long-term, the middle class needs these banks
First Trust NASDAQ ABA Community Bank (
Tisha Guerrero contributed to this article.