Community banks know that they can’t compete with national and international banks in terms of financial capacity, assets, and the multitude of financial services offered. So, to offset this competitive advantage, many community banks focus on individual consumers and small businesses in their market location.
A Favorable Attitude
Unlike national banks who simply look at customer accounts and loans as just another file among many, either meeting set criteria or not, community banks have a vested interest in helping their community members. That means they often have more adjustable vetting criteria which works to the benefit of local borrowers. One notable example is the Bank of Hawaii, which has been serving the state of Hawaii and the Pacific Islands for over 100 years. Home loans are particularly easier to get through a community bank than many national banks, and the process usually has lower fees and more flexible requirements.
Because community banks aren’t carrying all the infrastructure of a nationwide brick-and-mortar network of offices, they have more flexibility to offer competitive rates on loans as well as interest paid on savings. They want customers to boost their savings as well as borrow; those two activities are the bread and butter of any growing bank. So they are going to make it more attractive to consumers versus the national bank in the same town. For consumers and small businesses the difference can mean hundreds to thousands of dollars in interest savings or profit. One great example of a community bank with very competitive rates is Beneficial Bank, which has grown into the largest lender in Philadelphia.
One of the advantages of a community bank for a consumer is the fact that he is working with real people with real names just down the street. The local proximity of the bank allows a customer to interact on a personal level with bank personnel, getting real answers from real employees. Unlike national banks who aggressively push customers to find information on the Internet or on a phone message system, community banks make a point of personal service and encourage face-to-face meetings with individuals and business owners.
Keep in Mind
Community banks are still savings and lending institutions with minimum standards they have to meet. So they’re not just going hand out funds or interest rates willy-nilly. However, even with standards, community banks have definite advantages over national banks, especially at the consumer level. As a result, depending on what a customer wants, comparisons should definitely be made before jumping into any big financial decisions with a particular financial institution.
John Krystof is a financial writer located in New York City.