Community banks play an important role in the U.S. banking system, meeting the needs of local customers and small businesses. Compared to large national banks, community banks have a different business model and offer unique advantages to certain borrowers and depositors.
What is a Community Bank?
Community banks, also known as local banks or regional banks, are independently operated financial institutions focused on serving local communities. They typically have assets less than $10 billion and specialize in traditional banking services like savings/checking accounts, mortgages, business loans, and other lending activities within their geographic area.
Some key features of community banks:
- Operate in limited regional areas
- Offer personalized service and build relationships with customers
- Have autonomy to make local lending and investment decisions
- Cater products and services to community needs
- Portfolio lenders that hold most loans rather than selling to larger banks
Benefits of Banking with Community Banks
For many customers, community banks provide major advantages over large nationwide banks. Benefits include:
Local Decision Making
With centralized headquarters far away, big banks can seem detached from local communities. Community bank executives often live locally and understand the market and community needs. This allows them to provide more customized products and services.
Faster Lending
At community banks, loan decisions are made at local branches, not corporate headquarters. This allows them to assess borrowers and make lending decisions much faster than large banks. Small businesses in need of quick capital may favor community banks.
Personal Relationships
Walk into a community bank branch and the staff knows you by name. With multiple interactions, they understand your financial situation holistically. Big banks struggle to provide this level of personalized service.
Support Local Communities
Community banks channel deposits back into local areas by lending to small businesses, homeowners, and other community members. This supports local economic development more than big banks that spread capital nationally.
Fewer Fees
Community banks rely less on fees for revenue than large banks, offering free checking accounts and lower fees on other services. Their nonprofit orientation makes community banks attractive.
Drawbacks of Community Banks
There are some downsides to community banks to consider:
- Limited branch locations confined to one geographic area
- Fewer high-tech features like advanced mobile apps
- Often lack economies of scale, so interest rates on loans may be higher
- Small size makes them an acquisition target for larger banks
Finding the Right Community Bank
The benefits often make community banks a great choice for many customers. Look for community bank near Texas that are well established in your county or metro area. Schedule an appointment to meet with a branch manager and discuss your financial needs. Establishing relationships with local bankers can pay dividends for customers who want more personal and responsive banking services.
