Understanding a Community Bank

What are the differences between a regular bank and a community bank? Why should you do business with a community bank?

The term “community bank” carries with it more distinctive characteristics than you might expect, and in this Catalyst Partner Series podcast — featuring Beach Bank Tampa Market Presidents Henry Gonzalez and Steve Stagg — we dig into them and explain their importance. 

First off, it helps to define the various categories of banks in the market today. In one bucket are trillion-dollar, multinational banks like Bank of America, Wells Fargo, CitiBank, and JPMorgan Chase. Then there are super-regional banks; in Florida, some examples include the likes of Regions, Fifth Third Bank, and Truist Bank. 

Last but not least, you have community banks, such as Beach Bank, which is headquartered in Fort Walton Beach but has recently expanded its footprint in the Tampa Bay region. 

Big banks, Gonzalez says, have immense clout and power but also limitations when it comes to personalized service. “The customer doesn’t have high touch and feel from their banker,” he says. As an example, he says most big banks now process all loans under $5 million at regional underwriting centers around the country, instead of at the local level. “You are talking to someone on the phone who’s sitting in another state. That has left a very interesting market available to community banks to serve.” 

That’s because loans under $5 million are the “bread and butter” of community banks like Beach Bank, Gonzalez adds. “We want those all day long. We want to engage with those clients and take care of their needs on a one-on-one basis rather than have them call a support line and fill out an application, on a screen, that may or may not apply to all of their needs.” 

While a loan of, say, $1 million isn’t a big deal for a large national or even regional bank, it’s a priority for Beach Bank, Stagg says. 

At Beach Bank, a loan applicant will be served by a designated local client manager who will walk them through the entire process. The client manager gathers up all the information needed to process the loan application, which minimizes the back-and-forth flow of information and leads to a quicker decision and less stress and time commitment for the client. 

The client manager, Stagg says, will “work hand-in-hand with the credit team” to determine and structure the right loan. And while a national bank might have a local banker to handle a loan application, that person “is merely sending the information to a centralized group that’s plugging it into a computer and coming up with a yes or a no.” 

Community bankers differ in their approach to making decisions about loans. They’re more interested in “the story behind the numbers,” Gonzalez says. “It’s going to be fascinating to see how some of these loans coming up in 2021 are underwritten because I don’t know that an algorithm is going to take into account that 2020 had a pandemic. Everybody’s numbers are going to look pretty skewed. Some will be skewed to the positive, but I fear many will be skewed to the negative.” 

Community banks, conversely, look beyond financials to uncover “the human side” of a small business, Gonzalez says. 

Unfortunately, because of mergers and acquisitions, the community banking industry’s ranks are dwindling. “Florida is a very attractive market for larger banks,” Stagg says. Fewer banks are being started, as well, further shrinking the sector. 

“Our demographics [in Florida] call for more community banks,” Gonzalez adds. “We have an economy that’s growing and low taxation, so a lot of influx of new people. You would think there would be more banks.

All the more reason to do business with a growing community bank like Beach Bank. For more information about how Beach Bank can help you achieve your financial goals, visit https://www.beach.bank.