First State Bank: How local banks offer better service and drive your hometown economy

A growing business may think a national or large regional bank would best serve their business needs, but in reality, it is easy to get lost in the shuffle. As big banks tend to cater to big business, community banks offer many advantages as a dedicated business partner.

A local bank is knowledgeable about the community in which a business operates and can make quicker decisions from a local perspective instead of relying on decision-makers in another city or state. Business owners many times are able to talk directly to the head of lending or the president about their business.  

“When considering where to bank, look no further than around the corner. Community banks only thrive when their customers and communities do the same, so taking care of their customers and looking out for the best interest of their community is inherent in the way community banks conduct business,” says Gene Lovell, CEO and president of First State Bank.

Smart Business spoke with Lovell about why community banks might be the best place for your corporate and personal banking.

Why are community banks important?

A community bank understands firsthand that businesses are the backbone of a local economy. If a community bank is to succeed, local businesses must do the same. Local bankers take time to listen and understand a business owner’s vision because small businesses are the bank’s mainstay.

Large banks are not tethered to the places they operate. Too many times, the deposits that national banks collect from local residents and institutions leave the state to be invested in distant communities, countries, or on Wall Street, far removed from local account holders’ interests.

By banking with a community bank, money is put to work in the surrounding area in the form of loans to residents and business owners. In addition, by banking locally, consumers and businesses ultimately invest in their hometown by stimulating the economy and creating growth.

How else are community banks different from national banks?

The ownership of the bank — and board of directors — is generally made up of individuals who live and work in the communities they serve. They are business leaders who are deeply ingrained in the community and are more likely to serve on other local boards, attend community functions and know area business leaders.

Their local knowledge of the market area provides a significant advantage for the bank and its customers. Because they are so involved locally, they can spot needs and talk to clients before they even walk into the bank. At the same time, business owners have better access to management. Bank decision-makers make personal visits and really get to know their customers. Staff doesn’t rotate to other locations or departments; when you walk in, you see the same people with whom you have already established a relationship.

Community banks also tend to heavily participate in U.S. Small Business Administration loan programs.

How else do community banks help small businesses?

The largest 20 banks account for 57 percent of all bank assets, but only 18 percent of their commercial loans went to small businesses, according to the Federal Deposit Insurance Corporation. While small and midsize banks, which together account for 22 percent of all bank assets, lent 56 and 33 percent, respectively, to small businesses. In addition, smaller institutions continued to lend to small businesses at a steady rate during the recession, when big banks abandoned the market.

What makes a community bank a better place to do business?

The majority of community banks remain among the most financially sound in the country, because of conservative management practices. Where the federal government was quick to bail out ‘too big to fail’ banks during the economic crisis, most community banks were left to fend for themselves and came through the crisis as stronger banks. Most community banks were loyal and continued to lend to customers when many big banks did not. The community bank can be a safe haven from impersonal bank practices.

Eugene Lovell is president and CEO at First State Bank. Reach him at (586) 775-5000 or [email protected].

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