Why Small Communities Prefer Local Banks

A few years ago the FDIC released a study showing how local banks are vital in the community and for the country at large.

The study confirmed that the community bank business model is based on building relationships with their customers. Local community banks have a symbiotic relationship with the communities they serve and employees tend to have an ownership mentality opposed to a regular 9-to-5 job.

We asked Todd Middleton, head content writer at 1-855-Jet-Debt how local banks stack up to mainstream ones:

“There are nearly 5,000 community banks across the country and together they have more locations than that of Chase Bank and Bank of America. The only downside is that being local or regional, they don’t have as many ATM locations as the traditional banks.”

According to the FDIC study community banks make up 95% of U.S. banking organizations, hold the majority of banking deposits in rural and micropolitan counties, and are often the only physical banking presence in communities smaller than 5,000 people.

Other notable info within the study:

  • Strong majority of bank employees live in the community they service
  • They offer record-low interest rates on mortgages and credit cards
  • Community banks incur lower credit losses vs. non-community banks.
  • They are well-capitalized, and sometimes owned as a subsidiary of a larger commercial ones.
  • Hold relatively diversified asset portfolios. Banking consolidation is stabilizing.

For most people a community bank is the best option for your financial needs. When it comes to home mortgages or student loans you’ll almost always find that your local bank will offer you a better interest rate and won’t be as strict with the penalties if you fall on hard times.

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