At the time, information systems were quite primitive, and it was difficult and costly to obtain data about potential borrowers who were not family members or those with whom they had a close relationship (Lamoreaux, 1994). Relationship finance continues to be at the heart of community banking.
I believe that the most significant characteristics of community banks are: 1) their importance in small-business lending; 2) their tendency to lend to individuals and businesses in their local areas; 3) their tendency to rely on retail deposits for funding; and 4) their emphasis on personal service (Critchfield, et. al., 2004; Petersen and Rajan, 1994).