even the smallest institutions, to rely increasingly on intermediary sources, such as deposit brokers, the internet, and other automated service providers, to raise funding to support asset growth and meet loan demand. deposits gathered from such sources, even those not explicitly “ brokered, ” can be less stable than traditional core deposits, since the depositors typically lack any other customer relationship with the institution and could shift funds to a different bank or investment in search of a higher return. in addition, many regional and community banks today rely more heavily than in the past on wholesale borrowings from financial intermediaries, including other commercial banks and securities firms, to supply portions of their funding mix. indeed, regional and community banks have relied increasingly on the liability side of the balance sheet for funds management. most observers, for example, have been unaware of how successful community and regional bankers have been at directly raising uninsured deposits in their local markets when loan demands have exceeded core deposit growth. in the latter half of the past decade, the uninsured deposits at these banks grew more rapidly than those at larger banks. to be sure, large time deposits cost more than insured deposits, but community banks have maintained their profits and returns on equity. the creativity that community banks have shown in supplementing their core deposits - - deposits that have grown less rapidly as attractive substitutes became available for their customers - - has once again surprised those that believe smaller banks can no longer compete in modern financial markets. such ingenuity in funding supplements their creativity in maintaining and increasing their loan base in the competition with their larger rivals. this ingenuity also increases the need for closer management of funding at the same time that regional and community banks ’ investment portfolios have become more complex, with holdings of instruments that are in some cases longer - dated or have more options, than traditional bank investments. even in terms of the capital base, the widespread use of trust - preferred securities has introduced additional complexity to regional and community bank holding company balance sheets. the expanded use and acceptance of asset - backed securities have also enabled regional and community banks to take advantage of what we, only a few years ago, considered, to be “ large bank ” opportunities to originate and sell large volumes of mortgages and other consumer loans, either directly to purchasing intermediaries or indirectly through a securitization vehicle. to be sure, the sale and securitization of assets give rise to varying types and degrees of risk to the originating institution

borrowers. it is in large measure through such contact and personal knowledge of customers and community that successful bankers, small or large, maintain a significant presence in the market and demonstrate commitment to their communities. indeed, time after time we have seen that community banks have gained market share when large banks entered their market by acquisition ; anecdotal evidence indicates that the gains have gone to existing community bankers and de novo entrants, both faring well in competition with their large out - of - market rival. moreover, regional and community banks are bankers to many small businesses. more than 99 percent of all employers in this country are classified as “ small businesses. ” small businesses as a group employ fully one - half of all private - sector workers and provide the lion ’ s share of net new jobs in the economy. with small businesses as primary commercial customers, regional and community banks have long been, and will continue to be, an element of strength in our economy. consequently, the safe and sound operation of regional and community banks must be ensured. at the same time, these banking organizations must be encouraged to be innovative in meeting the needs of their customers. the competitive advantages of smaller institutions are not without accompanying benefits for the management of traditional risks in the banking business. the management of credit risk, historically the most significant exposure of banks, is the obvious case in point. personal knowledge of customers - - their character, opportunities, competence, resources, and capacity for repayment - - not only is the competitive “ leg up ” in establishing a sound and mutually profitable credit relationship, it also helps a successful community banker in setting the baseline for serving the customer ( and the bank ) by gauging the appropriate extent and the terms of that relationship. misfortune will occur sometimes, and business conditions will periodically weaken, as those events have occurred routinely in the past. but no one in the community - - customer or bank - - is served by the extension of credit that would be judged unsound in the light of the customer ’ s capacity to perform when that credit was granted. increasing complexity of regional and community banks traditionally, smaller banking organizations have been regarded as subject primarily to credit risk, although interest, funding, and operational risks have also been major areas of concern. increasingly, however, liquidity and market risks have grown in significance as regional and community banks have gained greater access to less traditional sources of funds. competing alternatives to core deposits in the 1990s led many regional and community banks,