A community financial institution can be defined by its size, its mission, and its geographic location. The key word tying them together is community.
You might think a community financial institution only serves a small rural town, like you might find in Kershaw, South Carolina, or Fort Dodge, Iowa. But a community financial institution is more than a single branch in one town.
While it sounds like a fancy term for a local bank, a community financial institution can be defined by its size, its mission, and its geographic location — and not just in tiny towns like Tularosa, New Mexico or Woodstock, Illinois. You're just as likely to find them in Cleveland, Ohio as you are in Hastings, Nebraska. The key word tying financial services to these institutions is community.
On a mission of sustainable banking
A community thrives based on its economic health, and the economy of any broad neighborhood, city district, or small town flows through its community financial institutions. When an entrepreneur wants to open a new business, or an established business wants to expand its offerings to the community, often their first steps involve obtaining commercial loans. There are a variety of places from which to borrow money, but community financial institutions make an investment in the region and facilitate the economic opportunity of the people who live and work there.
When a business loan supports the local proprietor, that financing remains in the community. Local lending builds up the economic health of the region as the bank or credit union enables the financial health of the community, one business at a time. from Graceville, Florida to Culbertson, Montana.
The cycle of sustainable banking begins with the community financial institution and flows through each financial product and service into the community.
Small in size but strong at heart
Size determines the category of a bank or credit union. When you hear the term "megabank," you might think of a national chain of banks from Seattle to Miami. While the number of branches is important, what really determines the size of a financial institution is its total assets, or how much money the bank manages. Megabanks have considerable assets — and a wide regional spread — but those assets are not focused on the host communities where each individual branch might be located.
Ultimately, the mission of a community financial institution is to reinvest its assets locally. Credit unions by design are made up of smaller entities united in a common purpose, such as in support of a single employer, or operating within a local industry. Similarly, a community bank benefits those who bank local, shop local, work local, and live local, so these institutions choose to invest locally.
Providing business loans to the restaurants and food trucks in Citrus View and Hovley, California supports sustainable banking in and around Brawley, California. Likewise, the credit unions around Elizabethtown, Kentucky lend to and support stores and shops in Cecilia and Hodgenville, Kentucky, too. Each community financial institution sustains the region it serves by providing economic opportunity and regional financial growth from the heart of each community.
Putting the "development" into CFIs
A community financial institution may also have a specific designation as a community development financial institution, or CDFI, if it specifically provides financial services in economically underserved communities. A CDFI might be found in a metropolis like Little Rock, Arkansas, or along the lakeshore in Dunkirk, New York.
A community development financial institution supports mortgage lending to first-time home buyers and businesses in low-income communities. Sometimes a certified CDFI may be a traditional financial institution like a bank or credit union. Throughout these underserved populations, community financial institutions help to build up and fund opportunities for the residents and business owners in what might otherwise be economically distressed communities. A traditional bank or a cluster of branches of a small credit union can provide economic resources in what might otherwise be banking deserts.
Economic might — when others might not
The mission and purpose of a community bank or credit union is to build up the community it serves. We only need to look at the benefits of the Paycheck Protection Program (PPP) during the pandemic to see how community representation took on a greater focus thanks to each community financial institution.
When small businesses were impacted during the middle of 2020, far more local banks and credit unions were able to offer a PPP loan to sustain the economic health of their communities through the CARES Act. Businesses in Lovelock, Nevada and Ellettsville, Indiana were strengthened and sustained by the Small Business Administration loan fund facilitated and distributed by community financial institutions. The majority of loans that sustained communities weren't from megabanks, but from the financial institutions based in these areas.
Choosing local economic sustainability
While every community bank or credit union works to support the community it serves, it is up to its account holders to be partners in the effort. The financial services may help build affordable housing where those account holders live. Their investments may flow into community facilities used by the local bank account holders. Community financial institutions rely on the people who live in the community to invest in the community — that key word again, community.
Choosing to bank local is more than a matter of convenience. It’s not just choosing a nearby branch: It’s deciding to impact local economic growth, and to provide economic opportunity to your neighborhood.
That’s the case whether you’re pocketed in America's big cities, nestled in an outlying suburb, or perched along a quiet frontier of countryside. Every community deserves to be sustained by the economic strength of the community financial institutions that serve it. Whatever yours looks like, it is a reflection of you and your commitment to it.