However, in value terms, the share of small-business loans made by out-of-market firms did not exceed 18 percent in any year. Small-business owners look overwhelmingly to local lenders for credit. We see that, for community banks, the overall picture is complex. In financial terms, community banks remain quite strong, and there is considerable entry into the business.
New technologies and management methods have eroded some of the traditional informational benefits of relationship finance, however, and community banks have lost market share to larger banks and to nondepository institutions. But the data also show that many customers want to be served locally; they value proximity and convenience.