Local Focus

If you’re put off by the rigid formality and impersonal attitude of traditional banks, welcome to the world of community banking — where local needs and community welfare take center stage. 

Community banks are small-scale banks that operate within a specific geographic area and serve the needs of their community members. Much like credit unions, these banks can have a unique advantage over larger banks because they are attuned to the specific needs of their communities. As a result, they can be better placed to personalize their services.

Community banks and credit unions take pride in their personalized approach, where customers are not numbers but friends and neighbors. These financial institutions can be devoted to building strong relationships with their customers and are rooted in their respective communities. They offer a host of banking services — all tailored to help customers achieve their financial goals.

But community banks don't stop at just providing banking services. They are also typically involved in community work, supporting local businesses and charities, sponsoring events and organizations, providing financial education, and investing in local infrastructure. 

When you choose a bank or credit union with a local focus, you’re depositing your savings with an institution that recognizes that their success is intertwined with the success of their communities.

Key takeaways

  • Community-based: Community banks have a local focus and a deep knowledge of the local economy.  

  • Personalized banking: Community banks focus on personal relationships with customers and offer flexible services. 

  • Better interest rates: Community banks also tend to offer better interest rates on deposits than most larger banks.  

What are community banks?

Community banks are financial institutions that serve the banking needs of a particular geographical area. They are often locally owned and managed.

While community banks do not have the reach and branch networks of larger banks, their focus on local needs and priorities makes them popular in the neighborhoods they are located in and can make them a great choice for savers looking to deposit their money with an institution that’s focused on their community.

How are community banks different from large banks?

Community banks and larger banks differ on several distinct attributes including: 

  • Size: Community banks are smaller than large banks when it comes to assets, deposits, and the number of branches. Large banks are often multinational corporations with networks of branches.

  • Ownership: Community banks are often privately and locally owned. Large banks are usually publicly traded companies with shareholders.

  • Focus: Community banks specialize in serving the needs of their local communities. Large banks typically offer a wider range of services and cater to a broader customer base.

  • Customer service: Community banks pride themselves on offering personalized service to their customers. Large banks may have a more standardized approach to customer service.

  • Lending: Community banks may focus on developing their local economies and therefore approve more small and medium-sized business loans and home loans. Lending in large banks is primarily geared toward big enterprises and is based on rigid criteria. 

  • Community service: Community banks are active members of their local communities. They participate in charity, fundraising, and developmental activities. Comparatively, big banks may not be as invested in local economic development.  

Why use community banks?

Let’s look at what makes community banks special:

  • They are involved in community development: Community banks play an active role in the local community and support local charities and causes. They also help with fundraising, support local sports, sponsor events, invest in developmental projects, and even provide free financial education and advice to community members. Most importantly, they help local businesses raise funds, advise them on financial matters, and encourage local economic development. 

  • They promote entrepreneurship: Some community banks are classified as Community Development Financial Institutions or CDFIs. Their mission is to create financial opportunities and economic development in underserved communities. That is why they are rooted in the local communities, with a deep understanding of the local economy and business environment. This is especially valuable for small operators and budding entrepreneurs looking to grow or build a business.  Moreover, community banks tend to be more willing to lend to small businesses and individuals than large banks. This is because they often have a better understanding of the local economy and are generally more flexible in their lending criteria. No wonder community banks represent 36% of all small business loans.

  • They can be less expensive: Banking costs can add up for individuals belonging to low-income households. Unlike large banks, community banks may keep their fees to a bare minimum. They manage to do this because they usually have lower overhead costs compared to larger banks. Community banks generally do not charge monthly maintenance fees, may offer free accounts, and charge nominal fees in cases of overdraft or non-sufficient funds (NSF). The Consumer Financial Protection Bureau reports that ​​overdraft and NSF fees were 13% to 19% lower at small banks and credit unions than at their larger counterparts.

  • They may offer personalized solutions: Imagine walking into a large national bank and seeking a loan for your mom-and-pop business or your family farm. Chances are you’ll be rejected because it doesn’t make financial sense for such large banks to service small loans. Community banks, on the other hand, work primarily with a local focus. They may tend to be more agile in terms of tailoring banking products to meet customers’ specific requirements and can be flexible when it comes to eligibility and repayment terms. 

Spotlight on local-focus banks

Ponce Bank was born in The Bronx in 1960, a time when most banks had abandoned what was then perceived to be a community in decline. The founders of Ponce Bank dreamed that all that was needed to help their community was a financial fuel.

OceanFirst Bank employees volunteer thousands of hours every year with nonprofit organizations to help their neighbors in need. Through the OceanFirst Foundation, OceanFirst Bank gives back to local nonprofit organizations that are improving health and wellness, creating and sustaining safe and affordable housing, improving quality of life, and investing in youth development and education.

Grow your savings with community-based banks and credit unions

If you’re looking for a banking service that has a local focus, community banks and credit unions could be just right for you. These entities are locally oriented and focus on improving economic prosperity for entire communities. Generally speaking, they are not confined to selling pre-designed banking products. Instead, they are usually committed to customizing solutions to meet your specific requirements.

Raisin is the digital partner you need to help you choose a reliable community bank or credit union. Our easy-to-use platform lets you find, compare, and fund top financial products offered by competitive institutions and pick the ones that best suit you and your savings goals. 

Our savings marketplace contributes to your financial well-being by only listing financial products offered by federally-insured banks and credit unions. You can also manage multiple accounts on our platform with a single login. Plus, there are no account opening or maintenance fees!

Start your community banking experience with Raisin today!

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