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The future of community banks: lessons from banks that thrived during the recent financial crisis

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  • James W. Fuchs
  • R. Alton Gilbert
  • Andrew P. Meyer

Abstract

The authors study the distinguishing features of community banks that maintained the highest supervisory ratings during the recent financial crisis (2006 to 2011). They identify balance sheet and income statement ratios that separate these thriving banks from other community banks and supplement that analysis with detailed interview evidence from a sample of thriving banks. They conclude that there is a strong future for well-run community banks and that the banks that prosper will be the ones with strong commitments to maintaining risk control standards in all economic environments. There is no one-size- fits-all strategy, however, and each bank must develop a business plan that works in its market.

Suggested Citation

  • James W. Fuchs & R. Alton Gilbert & Andrew P. Meyer, 2013. "The future of community banks: lessons from banks that thrived during the recent financial crisis," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 115-144.
    • Handle: RePEc:fip:fedlrv:y:2013:i:march:p:115-144:n:v.95no.2
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    References listed on IDEAS

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    1. Forest Myers & Kenneth Spong, 2003. "Community bank performance in slower growing markets : finding sound strategies for success," Financial Industry Perspectives, Federal Reserve Bank of Kansas City, issue Oct, pages 15-30.
    2. Richard G. Anderson & Charles S. Gascon, 2009. "The commercial paper market, the Fed, and the 2007-2009 financial crisis," Review, Federal Reserve Bank of St. Louis, vol. 91(Nov), pages 589-612.
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    Cited by:

    1. Hassan, M. Kabir & Karim, M. Sydul & Lawrence, Shari & Risfandy, Tastaftiyan, 2022. "Weathering the COVID-19 storm: The case of community banks," Research in International Business and Finance, Elsevier, vol. 60(C).
    2. Alex Fayman & Su‐Jane Chen & Timothy Mayes, 2022. "Community banks versus non‐community banks: Post the Great Recession," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 51(2), July.
    3. Iglesias, Oriol & Markovic, Stefan & Rialp, Josep, 2019. "How does sensory brand experience influence brand equity? Considering the roles of customer satisfaction, customer affective commitment, and employee empathy," Journal of Business Research, Elsevier, vol. 96(C), pages 343-354.
    4. Chris Henderson & William E. Jackson & William W. Lang, 2015. "Insider bank runs: community bank fragility and the financial crisis of 2007," Working Papers 15-9, Federal Reserve Bank of Philadelphia.
    5. Markman, Gideon M. & Venzin, Markus, 2014. "Resilience: Lessons from banks that have braved the economic crisis—And from those that have not," International Business Review, Elsevier, vol. 23(6), pages 1096-1107.

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    Keywords

    Community banks; Financial crises;

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