Community banks play a vital role in supporting local economies and creating meaningful connections with the people they serve. Unlike national banks, which tend to take a broad, one-size-fits-all approach, community banks focus on the unique needs of their specific regions.
At institutions like First Merchants Bank, this local-first mindset allows us to go beyond traditional banking. As well as offering a wide range of financial services, we prioritize building deep and meaningful relationships with our customers, invest directly in local causes, sponsor community programs, and provide tailored solutions that reflect a deep understanding of the local area.
What is a community bank?
A community bank is a smaller form of traditional bank that operates within a certain area of the country. The terms ‘community bank’ and ‘local bank’ are sometimes used interchangeably.
The area community banks operate in could be a city, a county or a state. At First Merchants, for example, we primarily operate in the Midwest – specifically Michigan, Ohio and Indiana.
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Community banks represent a great banking alternative for people who want to be treated like a valued partner rather than just another number. They serve not just to exist within a community, but also to elevate it.
Local banks vs national banks
Although the exact services that local and community banks offer may vary depending on the specific bank, they will offer most of the services that a national bank does.
For example, First Merchants offers the same personal, commercial, and private wealth features – in addition to a robust mobile app that lets you do all your banking on the go – that larger banks offer, but with these services better tailored to local needs. These features include everything from standard checking accounts with accessible local banking experts ready to listen and help, mortgage loans complete with the advice of local mortgage expert's and credit card options where cash can be withdrawn fee free at thousands of ATMs in the Midwest and beyond. There are even specialized agricultural lending solutions that are designed to take advantage of one of the Midwest's largest industries.
As a community bank, all these options and more are operated to the same standard as a major national bank but with far more attention paid to local needs. For example, Midwesterners are far more likely to prioritize strong community values, support for local industry and enduring, personal relationships with their bank than someone in New York or Los Angeles, who might have their eyes set on more global concerns.
How do local banks benefit the community?
The benefits of local banks include the provision of localized services for local industry, community specific financial products, and job creation and training. They also benefit the local community in a number of ways including running local charitable and volunteering campaigns and funding scholarships for local students.
Local banks build relationships with their customers
One of the most important aspects of community banks is the care they show for their customers. For example, a national bank, which might have its headquarters half the country away, might not have the strongest grasp of a local community’s needs. Local banks in contrast were founded in these communities and continue to thrive there for decades, in some cases more than a century after.
First Merchants bank is a prime example of this, being a fixture in the Midwestern financial community since 1893. The deep roots local banks have in their communities encourages equally deep customer relationships that can even span multiple generations.
Ultimately this attentive people-first approach to banking results in customers being listened to and their problems actively solved.
Local banks align with local needs
By virtue of being local, community banks will naturally have a greater understanding of the area they operate in than their large national or multinational counterparts. This enhanced understanding means that local banks are well placed to offer services and solutions that match with the local economy, instead of the one-size-fits-all approach that many national banks must take.
For example, in states with a significant agricultural sector such as Indiana and Ohio banks like First Merchants may offer financial services based around this industry.
All of this can be particularly useful for small and medium-sized businesses that operate within a particular area and require local expertise that community banks can provide to help them thrive.
Not only are community banks a good option for services related to state-specific industries, but they can also provide localized versions of traditional services with rates and terms that are designed to suit the area.
Community banks may, for instance, offer certain mortgage packages with eligibility requirements that include living in a specific county. These packages are often designed to be financially accessible, with the goal of increasing stable homeownership in the areas they operate in.
The Next Horizon Mortgage offered by First Merchants is one example of this type of service. Through a dedicated Community Home Lending Team, citizens of various counties across Ohio, Indiana, Michigan, and Illinois can potentially access mortgages with down payment grants, lower monthly payments, and more accessible loan terms.
Local banks invest in local causes
Community banks have a vested interest in making sure that their area, and the people within it, thrive at all levels of society. As a result, many local banks frequently contribute to local charitable causes.
These donations are sometimes for specific local charities or for national charities doing work in the local area. For example, First Merchants has worked closely with Habitat for Humanity, cumulatively donating hundreds of thousands of dollars as part of their work to help bridge the homeownership gap. First Merchants' involvement with Habitat for Humanity is not just limited to financial contributions – staff volunteers have contributed hundreds of hours toward helping build housing with the charity across Ohio, Indiana, Michigan, and Illinois.
Local banks might also support community foundations, sponsor local events and scholarships and provide financial education and support closing historic gaps in equity and helping diverse communities build wealth.
By giving back to the community in these ways, local banks engrain themselves within the fabric of a city or state in a way that's not possible with a large national bank. This, in turn, builds trust within the community and helps create a positive working and social dynamic between a community bank and the people and businesses they work with.
Local banks create jobs
One of the most important things a community bank does is help drive the local economy through job creation.
Community banks offer long-term, stable employment with strong progression opportunities. We have people working at First Merchants who have been with the business for more than 40 years and have, in that time, progressed from managing our banking centers all the way up to becoming a director!
Local banks also offer internship and training opportunities for young people taking their first steps into a career in finance and are also likely to run special apprenticeship programs for certain groups such as veterans to help them re-adjust to civilian life in the local area.
Additionally, the experience of working at community banks equips them with transferable skills like customer service, leadership, compliance, and financial literacy. This means that not only are community banks creating local jobs, but they are actively building a modern and skilled local workforce and creating a springboard of opportunity for the community.
Are local banks better for the community?
In many cases, yes. Community banks offer a level of personal connection, regional investment, and tailored solutions that national banks simply can’t match. They focus on long-term relationships, not just account numbers.
If you’re looking for a banking partner that understands your goals, supports local causes, and contributes to the community’s success, a community bank is a compelling choice.
At First Merchants Bank, we combine the capabilities of a full-service financial institution with the heart of a local partner. Every product we offer—from checking or savings accounts to commercial loans—is delivered with a commitment to helping our communities prosper.
Book an appointment today and explore how community banking can work for you.
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