When customers walk into their community bank they are met with a friendly face, greeting and a smile. Once the transaction is complete, the customer is going about the day perhaps not realizing what supporting a community bank really means…
The Federal Deposit Insurance Corporation classifies community banks as having $10 Billion, or less, in assets. These Banks, Community Banks, are more likely to be privately owned than much larger banks. Community Banks maintain a conceptual rationale of relationship banking and accountability to the customers they serve. Community Banks are the most common size of bank within the industry.
Over the last three decades there has been a decline in the number of U.S. Community Banks from more than 18,000 to less than 5,800. Just .2% of U.S. Banks hold more than two-thirds of industry assets. So why support a Community Bank?
Generally, Community Banks are highly capitalized, meaning they’re better prepared than their larger competitors in an event of a downturn. It was only ten years ago when Lehman Brothers filed bankruptcy which many consider the beginning of a global financial crisis. It wasn’t until after Lehman failed that policymakers initiated a $700 billion bailout program for companies deemed “too big to fail.” As a result, The Dodd-Frank Wall Street Reform and Consumer Protection Act was implemented. It is considered the most comprehensive financial reform since the Glass-Stegall Act, put into place after the 1929 stock market crash.
Local banks play a huge role in funding small businesses, which employ more than half of the private US workforce. Without community financial institutions, which make up 96% of all banks, these jobs would not be possible.
Community Banks focus on personal banking services. These include accepting deposits, offering checking and savings accounts, as well as business, personal and mortgage loans. As local institutions, they reinvest in their communities, and channel loans to their depositors’ neighborhoods – promoting localized growth. Otherwise megabanks are taking the community’s hard-earned capital and are investing outside the communities they serve.
Employees are often “homegrown” and understand the highs and lows of the local economy. Consumers and small businesses prosper from the local decision-making, local leadership and local investment that Community Banks provide. Knowing the history and reputation of borrowers and their importance to the community is a better indicator of repayment than credit reports, ratios, and uncertain pro forma statements.
Community bankers typically go above and beyond to make sure their customers have a happy, comfortable banking experience. Because of that personal touch, the level of customer support offered by community financial institutions is unparalleled. Business development officers and management take an active role in attending community functions and local volunteering.