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5 tips for choosing a community bank

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5 tips for choosing a community bank

Is there a difference between the national bank you see ads for on TV and that community bank around the corner?

Not really, says Denise Winston, founder of the Bakersfield, Calif.-based Money Start Here consumer education series. “A bank is a bank. It boils down to the following: convenience, products, services, fees and long-term relationships.”

Marcia Cornett, finance professor at Bentley University in Waltham, Mass., agrees. “From a consumer’s perspective, both national banks and community banks offer the same basic services,” she says, adding that the main difference is that national banks, in general, tend to be able to offer services at slightly lower rates, while community banks pride themselves on more personal service.

But if you’re one of those consumers who put service above price, you’ll find a lot of choices when picking a local bank. According to the Independent Community Bankers of America, a Washington D.C.-based trade group, there are nearly 8,000 community banks, in more than 50,000 locations. So how do you choose the right community bank? Read on for five tips.

Local counts

At their core, community banks are about local decision making, says Steve Lewis, CEO of First Place Bank, located in Ohio’s Mahoning Valley.

“You want to know that decision makers are members of the community,” says Lewis. “That’s going to make the difference on big things like mortgages, but it’s also about service and accountability.”

To test a bank’s commitment to local, Lewis advises customers to walk into any branch and ask to meet the management team. “If they’re in some other state, that’s a bad sign,” he says. Lewis also recommends that customers call their bank’s headquarters. If there’s no way to get senior management on the phone, there’s a high likelihood that the bank doesn’t take customer service seriously.


When you use a large national bank, there’s a perception that you’ll have a coast-to-coast ATM network.

But choosing a local bank doesn’t mean you’re going to rack up a small fortune in ATM fees when you go out of network. According to Lewis, a community bank may be part of a pretty big network that gives their customers options locally and away from home. Even better, Lewis reports, some community banks waive fees on out-of-network ATMs, if the total number of transactions is below a monthly threshold.

Still, those details vary with each bank because fees negotiated between banks and ATM networks aren’t uniform. So it pays to check with a bank and weigh your needs against their fees.


Fees come with banking, and every bank is different. Depending on how much money you have on deposit there can be a fee for maintaining the account, and there are almost certainly fees for things like wire transfers and bounced checks. While Cornett says big banks should be able to offer services at reduced costs because of economies of scale, Lewis argues that community banks are often more competitive.

“We’re smaller, and we’re very sensitive to fees because our customers are going to be more vocal,” says Lewis, adding that they might charge more to have an account, but will likely charge less when a check bounces.

A healthy bank?

If the financial crisis of 2008 taught us anything, it’s that banks can fail. Community banks represent the bulk of those failures. But that doesn’t mean there’s more risk associated with community banks, says Cornett, who points out that the list skews toward community banks because they outnumber national banks by a wide margin.

“When a community bank fails, consumer deposits are insured (until January 2014) up to $250,000 per person, per bank,” Cornett says, adding that in most cases, healthy institutions that are able to offer continuity of service purchase the failed banks.

But community banks that fail often collapse because of their willingness to take bigger risks on their customers, Winston warns.

“(Community) banks pride themselves on being accessible and making exceptions,” Winston says. “This can lead to overconfidence in clients’ ability to repay debt or handle their depository accounts satisfactory.”

To guard against choosing a risky community bank, Lewis advises customers to ask for the institution’s financial statements. Another option is to look at bank ratings like those offered by

Personal relationships

People who choose community banks often do so because they value that personal relationship, says John T. Brennan, trust officer at Cape Ann Savings Trust and Financial Services in Gloucester, Mass. “A community bank customer should have some individual who embodies their bank.”

To find that individual, Brennan says customers need to do their homework and interview banks the way they would any other professional. And don’t be afraid to ask for references.

But don’t let the attention to personal service fool you. In the 21st century, every bank should offer online banking. By and large, most community banks do just that, allowing their customers access to their money 24/7 from anywhere in the world.

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