The importance of local banking relationships

Published on Jul 01, 2021

The importance of local banking relationships
A community is more than just a location. It’s the people, places and businesses that make up an area. Financial institutions are an integral part of that infrastructure. Through lending, financing and investing, banks see community members through all their big milestones.

Your banker was there when you bought your first car, signed your mortgage, or started your business. Most institutions take this responsibility seriously and are dedicated to building a strong relationship with the community. Here are some examples of how banks impact the communities they are based in.

They drive a personal investment in the community

Local and regional banks are more in touch with the needs of the community. Employees and board members of these banks are your neighbors and friends. They may shop at the same grocery store and frequent the same coffee shop as you. Their kids may go to the same school. This means that they are personally invested in the success of your community and local business.

They provide a backbone for small businesses

According to the FDIC 2017 Annual Report, community banks are the “lifeline to entrepreneurs and small enterprises of all types.” These local and regional banks hold 43% of small loans for businesses and farms. They are also pivotal players in rural and small-town communities, holding over 75% of all deposits in almost 1,200 US counties.
The flexibility, lower fees, and community conscious attitude of many of these banks mean that they are often the best (or only) place a small business owner can turn for financial assistance. Bolstering the economy through support for entrepreneurs and local communities leads to stronger relationships between these banks and their customers.

They are instrumental in community development

Sometimes it takes a local bank to see the person behind the numbers. Frequently, these banks will provide more than just financing to individuals, coupling loan agreements with personal development resources. These may include counseling in business management, household budgeting, debt management, and predatory loan identification. By supporting these individuals, banks strengthen the community at large, and can have a monumental impact on individual families.

They shape the economic landscape

Since 2012, the FDIC has started a number of studies and publications to understand and support these banks throughout the country. These studies show that community banks are thriving, even as consolidation continues to rise in the industry. Consolidation at the community banking level does little to diminish the nature of these institutions, since most community bank mergers occurred with other community banks, ensuring continued value system within the organization. In fact, as of September 2017, 92% of all FDIC insured institutions were community banks. Smaller banks may not have as much weight to throw around as the major national chains, but their impact is widespread. (FDIC 2017 Annual Report)
The future of banking is in customer experience and community relationships. Technology can augment the industry, and it changes the game in many ways, but it’s still about how we, as banks, can better serve the community and its members.