The Advantages of Partnering with a Community Bank
When it comes to banking, not all financial institutions are created equal. A community bank is a financial institution serving a specific geographic area or community. They are locally owned and operated, and provide services tailored to the local community’s needs, like personal and business banking, loans, mortgages and investment services.
More people are choosing to bank with community banks rather than larger, commercial banks because they’re more focused on the success of the local businesses. Community banks are often viewed as more attractive than big banks because they prioritize client service and relationships, local investments, financial stability and competitive interest rates and fees.
Why Your Money Could Be Safer in a Community Bank
Community banks offer several advantages compared to larger national or international banks. Here are a few reasons why some individuals may consider community banks to be better:
1. Community Banks Provide Better Client Service
Community banks pride themselves on getting to know their clients personally and tailoring banking services and offerings to meet unique client needs. Clients receive customized financial support for their specific situations and business needs.
In addition, working with a community bank allows clients to partner with local bank representatives who know the community and are familiar with the business landscape. Bankers are available in person, on the phone, through email or online chat to answer questions or concerns about accounts and financial circumstances. Some banks also offer more than only banking and lending products, such as comprehensive cash management solutions and ACH payment processing services to streamline business operations and save money.
2. Community Banks Prioritize Local Investments Both for Their Own Profits and for Their Donations
Community banks prioritize investing in their local economy, positively impacting the community by boosting economic growth and supporting local jobs.
In addition to supporting local businesses, community banks prioritize providing affordable loans to community members and often focus on underserved businesses in the community. This approach helps build a strong local economy and financial foundation. By offering competitive interest rates and flexible repayment terms, community banks can help community members access the necessary funds to achieve their business goals and help keep the job market healthy in the community.
3. Community Banks Have Local Decision-Making Authority and Local Ownership
Community banks generally have more decision-making authority at the local level. They are often able to make lending decisions based on a more holistic evaluation of an individual’s or business’s situation, considering factors beyond credit scores. This can make it easier for individuals and small businesses to secure loans and other financial services.
Commercial Bank of California (CBC) is a privately owned community bank, with its Board of Directors, leadership and owners living in and serving Southern California. Being private allows CBC to make even financial decisions in the best interest of its team and clients to positively impact the surrounding community.
4. Community Banks Are More Flexible in Their Services, Products, Innovation and Decision Making
Compared to larger banks, community banks can be more flexible and innovative in their products and services. They often offer tailored solutions, negotiate terms, provide more flexible loan options and develop new products to help businesses improve their overall financial operations. This flexibility can be particularly beneficial for borrowers who have unique financial circumstances or specific requirements.
As a private bank, CBC doesn’t have investor pressures like most banks. Being private allows flexibility to make decisions in the best interest of their clients, team and the market dynamics. This gives CBC’s team a constant pulse on the local economy, allowing their team to pivot strategy when necessary.
5. Community Banks Are More Financially Stable Because They’re More Conservative to Protect Their Community
Community banks are more conservative and diverse in their investments, which can help them weather economic downturns more effectively than big banks. They have a more intimate understanding of the local market and the client’s needs. This, in turn, helps them make more informed investment decisions.
Community banks are also less likely to engage in risky investments or complicated financial products that can expose them to significant risk. This is because they are more connected to the local market, enabling them to anticipate economic trends and adjust their strategies accordingly.
CBC is shielded from the exposure of the less predictable public markets and purposefully closely manage our own investment risk to protect the bank, the local community, our team, and our clients, because they are privately owned. They achieve this because their investment portfolio is well diversified with a focus on steady cash flow generation and a low-to-moderate exposure to interest rate risks.
6. Community Banks Can Offer More Competitive Interest Rates and Lower Fees
Community banks often offer more competitive interest rates on deposits and loans. They have lower overhead costs and can pass those savings on to their clients through higher interest rates.
They also charge lower fees for banking services, from checking account fees to ATM fees. Community banks may waive fees for clients who meet specific criteria, such as maintaining a minimum balance or setting up direct deposit.
In addition to offering competitive interest rates, community banks may provide favorable loan terms. They are more willing to work with clients to find suitable loan terms rather than relying on a one-size-fits-all approach. The loan terms can include extended repayment periods, flexible repayment schedules, and lower origination fees.
7. Community Banks Are More Involved in Their Community Involvement
Community banks are more locally focused and deeply connected to their communities. They engage in community involvement activities like sponsoring local events and organizations, volunteering and offering financial education and support to local businesses and residents.
Through these activities, community banks help build stronger communities and support the growth and development of local economies. Community banks may also partner with local organizations to offer financial education and support to residents.
For example, they may offer workshops or classes on budgeting, saving and investing. Financial education can help individuals and families build financial skills and confidence, increasing financial stability and security.
8. Community Banks Have Local Leadership Which Makes Them Easily Accessible
Unlike national banks, community banks are often more accessible. They offer more personalized support and virtual solutions, and they take a grassroots approach to supporting businesses in common and unique markets.
Community banks may offer simpler online and mobile banking options, which benefit people living in remote areas or traveling to a branch. They may also be more accessible in terms of the offered services.
While community banks may have different services than large national banks, they provide tailored services that better suit their local clients’ needs. The services can include specialized lending programs for small businesses and farmers or investment services focused on local industries.
9. Community Banks Are FDIC Insured Like Big Banks
The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the federal government. It was created in 1933 in response to the bank failures of the Great Depression. The FDIC provides deposit insurance to protect depositors if their bank fails.
Community banks, and all banks in the United States, are legally required to be FDIC members and participate in the deposit insurance program. Therefore, if a community bank fails, the FDIC will step in to insure the deposits of the bank’s clients up to the current limit of $250,000 per depositor per insured bank.
The FDIC insures deposits in all types of accounts. These accounts include checking accounts, savings accounts, money market accounts, and certificates of deposit (CDs). It also covers other deposit products, such as cashier’s checks, money orders, and traveler’s checks.
More Than a Business Bank: Commercial Bank of California
Commercial Bank of California is commemorating two decades in business. We were founded by entrepreneurial business owners and are led by a talented team with an ownership mindset.
We’re forging new roads and building partnerships to not only give back to our communities, but to empower them. We have partnered with more than 12 community organizations and schools to start financial literacy programs to help our community better navigate their finances.
CBC is a full-service, FDIC-insured, business bank headquartered in Irvine, California.
Contact us today to learn more about how our banking strategy can help you.