Measuring What Community Banks Bring to the Table    

By Kylee Wooten

In many ways, banking has been radically transformed in recent years. Today, customers can work with virtual banks, virtual credit cards, and virtual customer assistants. And yet, as technology enables some banks to reach every corner of the nation and even go branchless altogether, community banks continue to be as important as ever to a broad range of customers for many different reasons.

April is Community Banking Month, and as it comes to a close, it’s a good time to reflect on some of the ways that community banks remain vital to Main Street.

Here are five reasons to celebrate community banking:

  1. Community banks make up 92 percent of all banks in the United States.

Although a handful of national brands might be more familiar to most people, community banks comprise roughly 92 percent of all banks in the United States. Thousands of community financial institutions can be found in small, rural and remote locations. Their availability in these areas plays an important role in agricultural finance and lending, as they help to keep rural communities throughout the United States healthy, growing and vibrant.

  1. Community banks serve as the only local source for banking services for many communities throughout the country.

In fact, for more than one in five of the nation’s 3,100 counties, community banks are the only physical branches that serve those communities. The landscape of community banking and overall number of community banks have changed drastically in the past few decades, but community banks are as important as ever to those living in rural and “micropolitan” counties, where these institutions hold the majority of banking deposits.

  1. Community banks are relationship lenders.

Borrowers are more than just a number to community banks, which are more likely to account for qualitative information for a more holistic evaluation of an applicant. Due to relationship banking at community financial institutions, these banks have the ability to take both the financial statements the borrower provides, as well as the personal knowledge of the borrower into consideration for a loan. Personal relationships with community banks often enable lenders to create a more tailored, personalized lending experience for based on the borrower’s needs for his or her business. Relationship banking and the personalized banking experience at community banks has proven to be an important factor for customer loyalty and overall satisfaction.

  1. Community banks help support small businesses.

Community financial institutions play a crucial role in our national economy and our local communities. Although community banks only account for approximately 13 percent of banking industry assets, they hold 42 percent of the industry’s small business loans. Community financial institutions help local businesses thrive by providing them with credit, but also by becoming trusted advisors—helping small businesses make good financial decisions and manage their capital properly.

Because of community banks’ specialized knowledge of their local communities, they are able to make credit decisions based on “nonstandard data.” Community financial institutions’ relationship approach can frequently be the only avenue for small businesses and start-up companies seeking loans and other financial services. That’s because such businesses are often unable to satisfy the requirements of larger banks’ more structured approach to underwriting.

  1. Community financial institutions employ more than three quarters of a million people—and help support employment in other industries.

One reason community financial institutions are great at relationship lending is because those lenders are a part of the community. In fact, more than three quarters of a million people throughout the country are employed at community banks. On top of employing millions in their own branches, they also play a large role in ensuring small businesses throughout the country can continue supporting their own employees.

Kylee Wooten is a content marketing and social strategist at Abrigo, a financial information company endorsed by ABA for its Current Expected Credit Loss (CECL) solutions.