Five Perks of Choosing Local or Regional Financial Institutions
A commitment to the community and a focus on customer service lead the benefits of banking with a smaller financial institution.


For many, the decision between using a local or regional financial institution and a national bank comes down to more than just convenience — it’s about finding a banking partner that aligns with personal values and provides personalized service.
Here are five major benefits of choosing to bank with a local or regional financial institution:
1. Community-centric approach
One of the primary advantages of banking with a local or regional financial institution is the deep-rooted commitment to community. These institutions prioritize their immediate surroundings, leading to deeper, long-term relationships with their customers.
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Unlike large national banks, which may focus on densely populated urban centers, local and regional institutions are more accessible to customers living in rural or less densely populated areas, providing convenience and a sense of familiarity.
2. Personalized service and decision-making
Local and regional financial institutions emphasize a customer-centric approach. They develop products and services based on customer feedback, ensuring a high level of personalization.
Customers can negotiate favorable loan conditions and receive financial advice tailored to their specific circumstances.
In contrast, the more automated and standardized offerings of larger institutions are driven by shareholder returns, often resulting in less personalized service.
3. Investment in the community
Local and regional financial institutions actively participate in community events, supporting and highlighting the work of local businesses, fostering economic development and creating a sense of belonging among residents. They reinvest a significant portion of their profits into the community through affordable loan options to small businesses, support for community projects and sponsorships of local events.
This commitment strengthens the local economy and enhances the overall wellbeing of the community.
In contrast, large banks often focus on larger, higher-return projects, sometimes even in global markets, which can dilute their impact on local communities.
4. Governance and member empowerment
Credit unions, in particular, exemplify the benefits of local financial institutions through their member-owned structure. Every member has an equal vote in electing the board of directors, regardless of the size of their deposits. This democratic process ensures that decisions reflect the needs of the members, rather than external shareholders. Credit unions empower their members by giving them a direct voice in governance, influencing product and service offerings and driving community involvement.
In contrast, the governance of big banks is heavily influenced by shareholders, who prioritize shareholder returns and may not be customers of the bank.
5. Ensuring deposit safety
In light of the abrupt closures of Silicon Valley Bank (SVB) and Signature Bank last year, concerns about the safety of deposits have lingered. However, it’s important to understand that these failures were due to unique circumstances, such as high exposure to specific business sectors and a lack of portfolio diversification, which most financial institutions protect against.
Both banks and credit unions offer up to $250,000 of deposit insurance per depositor, per institution, through the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Share Insurance Fund (NCUSIF), respectively. This insurance provides a significant safeguard for customers’ funds. Additionally, regulatory bodies closely monitor the financial health of all institutions, ensuring that any emerging issues are addressed in short order.
Small and midsize financial institutions implement robust risk management processes to ensure portfolio diversification across different asset classes and business sectors. This approach helps to mitigate risks and maintain financial stability, providing customers with peace of mind regarding the safety of their deposits.
Choosing to bank with a local or regional financial institution offers numerous benefits, from personalized service and community investment to democratic governance and robust deposit safety measures. For those seeking a banking partner that prioritizes their needs and values, these institutions provide a compelling alternative to large, national banks. By fostering strong community ties and ensuring financial stability, local and regional financial institutions play a vital role in supporting the economic wellbeing of their members and communities.
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Kevin Brauer, a distinguished finance industry professional with over three decades of experience, has been at the helm of Affinity Credit Union as CEO and President since January 2023. His substantial contribution to Affinity over the past seven years has been instrumental in propelling the firm's value proposition and innovating its financial well-being initiatives. Brauer leads Affinity's dedicated team of 500 employees at its Basking Ridge, N.J., headquarters and throughout its 18-plus branches.
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