Q: Recently, several community banks have opened in the area. What are the advantages and disadvantages of working with a community bank versus a regional or national bank?
The problem is choosing the right bank. Here is a bank, there is a bank, everywhere bank-bank. Song or reality? These days it is a reality. With so many banks to choose from, it is important to understand their similarities and differences, as well as their strengths and weaknesses.
Decision. Find a bank that meets your needs. For a person, choosing the right bank can mean the difference between getting a mortgage and the balance in an apartment. For a business, choosing the right bank can mean the difference between getting a loan and going out of business. Finding a bank that meets your needs may be more difficult than it seems. Let's look at two broad categories of banks.
Community Banks. Often initiated by executives who run into larger banks, public banks began work through New Jersey. In traditional corporate fashion, many of the more successful community banks were adopted by regional and national banks in the late 1990s. This left a void, so there was an opportunity for new banks to flourish.
One of their key benefits for customers is direct access to senior bankers and top management. In community banks, front-line employees have more opportunities to make decisions than larger banks that need to follow more stringent policies and procedures from corporate headquarters. For example, with the majority of large banks, the decision to grant a mortgage to an individual is based mainly on the applicant's credit score.
The public bank has the flexibility to process the application, consider the credit score and meet with the borrower to get an idea of any unique circumstances that may affect the final decision on the provision of the mortgage.
Community banks can offer personalized services that large banks face in difficult times. Regardless of whether the face of a cashier or bank officer delivering documents to your business is smiling, community banks go a long way towards providing a high level of personalized service. Community banks have proven themselves, retaining their staff, allowing them to provide a constant customer experience.
The weaknesses of community banks include a limited network of branches, lending opportunities and a range of financial services. Unlike some large banks, many of the local banks have a small number of branches. Fortunately, most of them offer Teller Machine automatic cards that can be used all over the world and via the Internet 24 hours a day, seven days a week. A growing business can understand that local community banks simply cannot offer a $ 30 million loan, which is necessary to expand operations, due to restrictions on bank lending. Consumers who seek investment and insurance services will often be rejected at a community bank. A number of community banks have recently started offering these services through partnerships with companies specializing in these services.
Regional and national banks. Some consumers like the idea that they can go to the same bank, no matter what city (or state for that matter) they are in - just like a fast food chain. Having the luxury of making a deposit at a branch office near your office or leaving near your home is a luxury that some consumers simply cannot resist. Many of the larger banks have hundreds of branches in a wide range of locations: from supermarkets to office buildings to individual locations.
Businesses that have cash, such as restaurants and gas stations, may require a regional or national bank with branches located close to each of their locations. Some businesses need to deposit cash into their bank accounts twice a day to reduce the risk of theft. Large companies seeking capital growth may require lending solutions offered by regional or national banks. Regional and national banks have enormous credit potential at the local, national and global levels. Most regional and national banks offer a wide range of financial services: from investment to insurance to trusts. These services may be offered by bank employees or through external partners.
Conclusions. Choosing the right bank should be based on your individual needs. Customers who are looking for a large branch network or a greater lending opportunity can best fit a regional or national bank. Customers looking for personalized service, direct access to senior management and more flexible credit criteria can best fit the community. Sometimes it comes down to supporting local businesses in your community.
08/07/07
Skloff Financial Group
Question of the month
Aaron Skloff, AIF, CFA, MBA
