How to find a community bank: 3 steps to pick the local bank for you

Mighty Deposits Guide, 2023 Edition

 

There’s no shortage of reasons one might bank with a local community bank. Perhaps you want your money to support the local economy, you’re a business owner needing a banker with specialized understanding of your region, or maybe you’re in search of better customer service. No matter the reason, when searching for a new bank, it’s important to consider all of your options. There are 5,000 banks in the U.S. and the majority are community banks.

 

The community banking landscape is changing. The presence of a nearby branch is no longer an indicator of how local a bank might be. Banking locally doesn’t necessarily mean banking nearby — you can bank online with your hometown bank long after moving away simply because you care about reinvesting there. Online and mobile banking are now commonplace.

Just as community banking has evolved, so too have the ways we evaluate and compare banks. If your focus is to find a community-focused banking option, here are 3 data-driven tips to help you differentiate between banks and make a decision.

How to find a local, community-focused bank


1. Get a list of banks focused on the geography that matters to you, with data to back it up.

A first step to picking a community bank is to determine which geography matters to you. It doesn’t necessarily need to be the place you live, but it might be. Where do you want decision-makers to be located? Do you need access to bankers with regional expertise? What communities do you want your money to circulate in? Where do you want access to branches? Then, determine which banks are based in the geographic location that matters to you.

This information is publicly available because each bank is required to report to regulators where their money is based. Specifically, banks report the location of deposits in branches. This tool compiles bank regulatory data and allows you to enter any zip code, city, or state to see what percentage of each bank’s money is based there. You can access government data directly, here. The location of deposits in branches is the best widely-available proxy for the geographic focus of a bank, but it’s not a perfect guarantee. (Banks are not required by law to publicly report the locations of all loan recipients. One reason is to protect customer privacy. Bank regulation encourages banks to meet the credit needs of communities in which they do business.) Some banks only do business near their branches, while other banks might make loans across the country. Nonetheless, looking at where money is based gives you an indication of where bank leadership is located and which areas are important enough to the bank for it to invest in a branch there.

2. Compare how much each bank invests directly in communities.

Once you have a shortlist of banks based in a geography that matters to you, it’s time to evaluate each bank’s community investment performance. There are many ways a bank might demonstrate its commitment to the community, like volunteering or sponsoring events, but if you can only evaluate one factor when finding a local bank, look at how much the bank directly finances communities.

Banks are required to publicly report how many loans they make for housing, businesses, farms, and more. This tool compiles government data to display one community financing metric for each bank in the U.S. This metric tells you what share of a bank’s total dollars (assets) are invested in communities, via lending for housing, construction, business, farms, and households, plus public works loans and securities. (Government data files can be accessed here.) It takes more effort for a bank to make a loan in the community than it does for them to invest in a more passive financial instrument, like a mortgage-backed security. No bank can have 100% of assets invested in communities (learn more about the methodology, here).

Every bank operates differently, so this metric doesn’t necessarily capture everything about a bank’s social or environmental impact; you can always reach out to a bank to learn about their ownership, their approach to investing in the community, and more. But if it’s important to you that your next bank invests your deposits into local, main street initiatives, don’t overlook community investing performance. To see top banks for community-investing in cities like Chicago, Houston, Seattle, and more, head over to our blog.

3. Check that the bank offers the accounts and loans you need.

If your banking needs are simple and you only need a checking and savings account, then every community bank should meet your needs. However, if you might need a mortgage or small business loan in the future (and if it’s important for you to do all your banking with one institution), these needs can help you narrow down your options. Many bank comparison sites only share product information for a small number of banks that pay to be listed. However, because all banks report to the government the types of lending they do, it is possible to make a fair comparison across all banks based on the types of loans and services you might need. This database compiles product information for all banks in the U.S.

 

How to open a community bank account

Once you’ve found a bank that works for you, head to the bank’s website to determine the best way to open an account. Many community banks offer online account opening, which can take as little as 5 minutes. (Some banks that offer online account opening are listed here, and you can filter by geography to see banks local to you.) Other banks may require you to visit a branch in person. The Consumer Financial Protection Bureau provides a helpful checklist for opening a bank account, including questions to ask and items to bring with you.

In summary: what you need to know to get started

  • Start here with the database of all banks in the U.S. Enter a city or state to see a list of banks in the place that matters to you. Filter down the list of banks based on any impact metrics or banking products that are important to you.

  • It can feel hard to choose a bank because accounts, rates, and convenience are often similar across banks. That’s why using data to check other factors — like where a bank is based and how much it actually invests in communities, in addition to whether it offers all the banking you need — can help you differentiate between banks and pick the best community bank for you.

  • No matter what any list tells you, there’s no one best community bank, since it depends on what you value and how you weigh the importance of different factors (like community investment, having a branch nearby, or interest rates, for example). 

  • If you find a bank that sounds good but you’re unsure, you can open one account just to get a relationship started. Later on, once you’ve had time to learn whether the bank is a good fit, you can decide to switch over all of your banking accounts.

Other helpful resources:

Bonus tip to magnify the impact of your community banking choice

Once you’ve decided on a new bank, share with others where you bank and why. Your money doesn’t sit in your bank, so the bank you choose is a vote for the future you want to build. By being open about why you use a community-focused bank, you can be an inspiration to others to bank intentionally.

Still having trouble picking a community bank?

If you care about specific issues, like environmental sustainability, social responsibility, or supporting low-income communities and communities of color, these guides will help you narrow down your options. If you’re looking for a credit union, start here.

 
 
 
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