Rural banks continue to thrive by knowing their communities, and offering services people want

While large banks continue to knock off mid-size banks by offering all the bells and whistles that come with joining a national, and sometimes worldwide corporation, small, rural banks continue to survive and thrive by offering a personal touch and service larger banks can't afford to offer, Brendan Greeley reports for Bloomberg Businessweek. Even though the number of U.S. banks has dropped from 12,000 to 6,000 since 1980, community banks, defined by the Federal Deposit Insurance Corp. as having less than $1 billion in assets, hold 70 percent of the deposits in rural areas. Most community banks serve one, two or three counties.

"Small banks in rural areas do a better job of what is generally considered Banking 101: underwriting home mortgages and loans to farms and small businesses," Greeley writes. "According to the FDIC in every five-year period since 1991, a lower percentage of loans from community banks has gone bad. Richard Brown, the FDIC’s chief economist, says small banks have a competitive advantage with 'nonquantitative' (sometimes called 'soft') information—knowledge of their customers and the local economy." (Read more)