What Is a Community Bank?


If you’ve ever been overwhelmed by the sheer size and complexity of large financial institutions, a community bank might be the antidote you’re looking for. These local banks are cornerstones of their local economies, offering personalized services you won’t typically find at larger banks.

This article will provide insight into what community banks are, how they operate, and how they can be a perfect fit for your personal finance needs.

Westfield Bank

What is a community bank?

A community bank is more than just a financial institution. It’s a cornerstone of its local community, providing tailored financial services to individuals, families, local businesses, and nonprofits. Many community banks operate on a smaller scale, often with less than $10 billion in total assets, a benchmark set by the Federal Reserve system.

Their localized focus allows community banks to offer nimble, customized loan options. This makes them a valuable resource for local economic growth. Additionally, their smaller size typically translates to a more personalized customer experience, distinguishing them from larger financial institutions.

History of Community Banks

Community banks have a storied past, acting as financial lifelines in rural and newly established areas. In their infancy, these banks served as the primary financial institutions for local farmers and entrepreneurs. Over the years, community banks have adapted to the evolving needs of their clients. They’ve incorporated modern technologies like online and mobile banking, making it easier for customers to manage their finances.

Yet, some things remain constant. Community banks continue to prioritize local community welfare. They actively participate in local events and often have a personal relationship with their customers. In an age where online transactions are the norm, community banks still offer a uniquely local touch.

Core Principles of Community Banks

Local Ownership and Operation

At the heart of community banks is the principle of local ownership. Run by people who live in the area they serve, these banks are deeply in tune with local economic conditions. Decision-making is typically quick and reflects a keen understanding of the unique challenges that local residents and small business owners face.

Personalized Service

The phrase “relationship banking philosophy” encapsulates what community banks are all about. Personalized service isn’t just a tagline; it’s a way of doing business. The moment you step through the door, you’re often greeted by name, an experience that sets community banks apart from larger financial institutions.

Community Focus

Community banks serve as financial hubs that channel significant resources back into the community. Unlike bigger banks that might prioritize larger, more lucrative markets, community banks invest in local businesses, sponsor community events, and even contribute to local infrastructure projects. They are deeply vested in the economic well-being of the area they serve.

What services do community banks offer?

When it comes to the range of financial products, community banks are far from limited. They offer the essentials—checking accounts, savings accounts, and investment accounts—but that’s just the beginning.

Community banks also offer specialized financial products that are tailored to their local markets. For instance, it’s not uncommon for a community bank in a rural area to offer agricultural loans. Likewise, they often have grant programs or low-interest loan options specifically designed to boost small businesses in their service areas. These specialized offerings underscore their commitment to local economic development.

Community Banks vs. Regional Banks vs. National Banks

Size and Reach

Community banks are generally smaller in size and scope than their regional and national counterparts. With a focus on a specific geographic area, community banks can devote more resources to understanding and serving local needs. This narrow focus allows them to be agile and responsive in ways that larger banks typically can’t match.

Services Offered

Community banks offer a robust range of financial products, much like you’d find at regional or national banks. However, they have an added advantage: specialized loan and grant programs for local businesses and initiatives. These customized services stem from their deep understanding of local economic conditions and needs.


If you value relationship banking, community banks have you covered. Unlike bigger banks, where the interaction can sometimes feel transactional, community banks aim for a personal connection. The long-term relationships they cultivate with clients lead to a deeper understanding of individual financial needs, making for a more personalized banking experience.

Regulatory Environment

Compliance is a big deal in the banking world, and community banks are no exception. They are subject to both state and federal regulatory oversight, including being part of the Federal Reserve system. Additionally, your deposits at a community bank are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000, offering peace of mind for your finances.

Economic Impact on Local Communities

When it comes to boosting local economies, community banks punch above their weight. Focused on local businesses for loans and other financial products, they help to stimulate job creation and broader economic development. Studies consistently show that these banks are often the go-to financial institutions for small businesses, underscoring their critical role in the health of local economies.

Pros and Cons: Is a Community Bank Right for You?


Personalized Service

At a community bank, you’re not just another account number; you’re a valued customer. The relationship banking approach seen at many community banks translates into a more personalized, attentive service. Staff often know customers by name and are readily available to discuss your individual financial needs, whether it’s an urgent issue or long-term planning.

Local Economy Support

One of the compelling reasons to choose a community bank is the impact your money can have on the local economy. These banks often reinvest deposits in local projects and businesses. By choosing to bank locally, you are effectively supporting your own community’s growth and development.


Limited Geographic Reach

While community banks excel in localized service, they may fall short in geographic reach. This could mean fewer branches and ATMs, particularly when stacked up against national banks. If you’re someone who travels regularly or requires frequent access to physical banking services outside your local area, this could be a drawback.

Niche Product Offerings

Community banks offer a range of essential financial products and services, from checking and savings accounts to loans. However, they may not have the breadth of specialized financial products that you could find at larger financial institutions. Whether it’s a specific type of investment account or a more complex financial instrument, you may need to look beyond your local community bank for these services.

Choosing the right community bank can feel overwhelming given the numerous options available. To assist you in your search, here are some well-regarded community banks in various parts of the country:

  • Capitol Federal Savings Bank: Operating mainly in the Midwest, Capitol Federal Savings Bank offers an array of financial products. Notably, they have a strong focus on home loans, making them a good choice for those looking to buy property in the region.
  • Amegy Bank: Based in Texas, Amegy Bank delivers a wide range of services in both personal finance and business sectors. Whether you’re an individual looking for a simple checking account or a business seeking a commercial loan, Amegy has you covered.
  • Westfield Bank: Westfield Bank serves the Ohio region and stands out for its comprehensive suite of services. In addition to standard checking and savings accounts, the bank offers investment accounts to help customers grow their wealth over time.
  • Bank of the Sierra: Located in California, Bank of the Sierra provides traditional banking services but also goes beyond the basics. They offer specialized services like wealth management and agricultural loans, catering to the diverse needs of their local community.
  • Broadway Bank: This San Antonio-based bank offers an assortment of financial products, including various types of loans and investment options. Their commitment to customer service and community development makes them a strong choice for residents of the area.
  • Southern Bancorp: This bank is headquartered in Arkansas and has a strong focus on community development. It primarily serves rural regions of Arkansas and Mississippi. Southern Bancorp offers traditional banking services but also engages in initiatives aimed at financial education and poverty alleviation.
  • Bank of Ann Arbor: Located in Michigan, Bank of Ann Arbor provides a comprehensive range of personal and business banking services. The bank is known for its community involvement, often sponsoring local events and charities.
  • Seacoast Commerce Bank: Based in California, Seacoast Commerce Bank specializes in Small Business Administration (SBA) lending, making it a go-to option for local entrepreneurs. It provides a full range of business and personal banking services, including treasury management.
  • Fidelity Bank: This Massachusetts-based community bank offers an array of deposit accounts, including checking, savings, and CDs. They also offer various types of loans, from personal to home equity.
  • The Bank of Elk River: Operating in Minnesota, this bank provides a wide array of personal and business banking services, including mortgage and investment services. Their focus is on building long-lasting relationships with their local clients.
  • Nicolet National Bank: With operations in Wisconsin, Nicolet National Bank offers not only standard financial products but also provides wealth management services. The bank prides itself on its personal touch and long-term customer relationships.
  • Century Bank and Trust: Serving communities in Michigan, Indiana, and Ohio, Century Bank and Trust offers a variety of personal and business banking services. They have a strong emphasis on customer service and community involvement.
  • Citizens Bank of Edmond: Based in Oklahoma, this community bank offers a wide variety of retail and business banking services. From standard checking accounts to business loans, the bank has a strong focus on meeting the needs of its local customer base.

How to Choose Between a Community Bank and Other Financial Institutions

Selecting the right place to manage your finances depends on several personal factors.

Personal Service vs. Extensive Options

Community banks often prioritize personalized service. If you value close relationships with your bank, this could be a big plus. On the flip side, larger financial institutions generally offer a broader range of specialized financial products.

Local Impact vs. Geographical Reach

If supporting your local community is important, a community bank might be your best bet. However, if you travel often, the limited number of ATMs and branches for many community banks could be a downside. Larger banks typically have a more expansive network.

Specialized Offerings and Regulatory Protection

Community banks provide essential services, but may lack some specialized financial products. Both community and larger banks offer regulatory protections, like FDIC insurance, to safeguard your assets.


Understanding community banks is crucial for anyone considering alternatives to big banks. They offer an array of services comparable to larger financial institutions but provide the added benefits of local ownership, community investment, and personalized service. Before you make your next move in personal finance, consider how a community bank might fit into your financial landscape.

Dawn Allcot
Meet the author

Dawn Allot is a personal finance writer and content marketing expert specializing in finance, travel, real estate, and technology. In addition to her work at Crediful, Dawn regularly writes for Bankrate, GoBankingRates, and The Balance.