“Community Banks vs. Big Banks: What You Need to Know”

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How Does a Community Bank Work?

Are you considering a different kind of banking experience? Community banks offer similar services to big banks but with some key differences. Unlike large banks, community banks focus on lending to and serving their local communities. They are often privately owned and prioritize long-term community interests over shareholder demands. This approach, known as “relationship banking,” can be particularly beneficial for small business owners and new homeowners.

Understanding Community Banks

While there’s no universal definition, community banks are generally smaller than the largest U.S. banks like JPMorgan Chase, Bank of America, Wells Fargo, and Citibank, which each have over $1 trillion in assets. Community banks typically have no more than $10 billion in assets. According to the Federal Deposit Insurance Corp. (FDIC), community banks are characterized by:

• Lending and deposit gathering within a limited geographic area
• Relationship lending based on long-term business relationships
• Private ownership, focusing on local community interests

Community Banks vs. Big Banks

Here’s a quick comparison:

Pros and Cons of a Community Bank

Pros

• Relationship banking: You’re more than just a customer. Community banks may consider your family history or small business when evaluating a loan.
• Local investment: Community banks lend to local people and businesses and often sponsor local initiatives.
• Personal touch: Whether it’s a friendly local branch or small-business services, a community bank might resonate with you personally.

Cons

• Size matters: If you prefer a national network of branches and ATMs, a big bank might be more suitable.
• Limited product range: While community banks offer many services, big banks may provide a wider range of financial products.
• Digital demands: Some community banks are investing in digital technology, but if you need specific big-bank tech features, you may need to shop around.

Should You Bank With a Community Bank?

Consider these questions:

• Do you prefer face-to-face banking? If you like in-person interactions, a community bank’s personal approach could be a welcome change.
• Are you community-oriented? Banking locally means your money is invested in your community. According to a 2023 survey by the Independent Community Bankers of America (ICBA), 72% of adults prefer a community-based bank, and 79% value local lending decisions.
• Do you own a small business? Community banks can be invaluable for small business owners, offering loans, lines of credit, and cash management services. During the COVID pandemic, community banks issued 60% of all Paycheck Protection Program (PPP) loans and 72% of PPP loans to minority business owners, surpassing larger financial institutions.
• Can you find a community bank that fits your needs? If there’s a community bank nearby that you think you’ll love, check it out. If not, consider other alternatives like credit unions or online banks.

Where to Find a Community Bank

Finding the right community bank may require some effort. Here are some tips:

• Check your neighborhood: Look for local branches in your community or shopping district.
• Use a locator: The ICBA has a community bank locator to help you find banks in your area.
• Ask a friend: Community banks often have enthusiastic customers who can provide recommendations.
• Read the news: Look for community banks that sponsor local events, volunteer, or offer financial literacy workshops.

The Bottom Line

Before opening an account at a community bank, visit their website to ensure they are FDIC insured and offer the products you need, such as free or low-cost checking, high-yield savings, home or small business loans, and robust mobile banking tools. Check their blog or social media to get a sense of their personality and customer relations. You might find a community you’d like to join—and gain a bank in the process.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We are here to help you with all your mortgage requirements!

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