Viability Of Community Banks In The Dallas Federal Reserve District: Evidence Of Relationship And Transactional Orientation
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Keywords
Federal Reserve, banks
Abstract
This paper examines the viability of community banks. The results indicate that larger community banks are more profitable and less susceptible to most forms of risk than smaller community banks. Evidence that smaller community banks are more relationship oriented and larger community banks are more transactional oriented is mixed. Smaller community banks have a lower cost of funding assets, perhaps as a result of a stronger relationship with depositors, but there is no evidence that their relationship with borrowers allows them to earn more interest income. The primary indication of a stronger transactional orientation by larger community banks is their ability to generate more non-interest income.
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