Local banks play a crucial role in fostering economic growth, stability, and prosperity within a community. Unlike large national or multinational banks, local banks are deeply embedded in the regions they serve, allowing them to better understand the financial needs of individuals and businesses. Their presence can lead to increased access to credit, support for small businesses, job creation, and overall economic resilience. Below, we explore the key economic impacts of local banking on a community.
- Support for Small Businesses and Entrepreneurs
Small businesses are the backbone of local economies, and local banks are often their primary source of funding. Unlike larger financial institutions, which may prioritize corporate clients, community banks and credit unions focus on lending to small businesses, startups, and family-owned enterprises. This access to capital allows entrepreneurs to expand operations, hire employees, and invest in new products or services.
Studies have shown that local banks approve a higher percentage of small business loans compared to big banks. Additionally, because local bankers have a better understanding of the regional economy, they can make more informed lending decisions, reducing the risk of credit shortages during economic downturns.
- Job Creation and Economic Growth
By providing loans to local businesses, community banks indirectly contribute to job creation. When small businesses thrive, they hire more workers, reducing unemployment and increasing disposable income within the community. This creates a multiplier effect-more jobs lead to higher consumer spending, which in turn supports other local businesses.
Furthermore, local banks themselves employ residents, keeping salaries and expertise within the community. Unlike national banks that may centralize operations in distant cities, community banks reinvest their workforce locally, strengthening the regional labor market.
- Strengthening Local Real Estate and Infrastructure
Local banks are major players in residential and commercial real estate financing. They provide mortgages to homebuyers and construction loans to developers, facilitating neighborhood growth. Because they understand local property values and market conditions, they can offer more flexible lending terms than larger institutions.
Additionally, community banks often invest in public infrastructure projects, such as schools, hospitals, and roads, by purchasing municipal bonds. This not only improves the quality of life for residents but also attracts new businesses and residents to the area.
- Encouraging Financial Inclusion and Stability
Many underserved populations, including low-income families and minority-owned businesses, struggle to access financial services from large banks. Local banks and credit unions often fill this gap by offering affordable banking services, microloans, and financial education programs.
During economic crises, local banks tend to be more stable than larger institutions because they avoid risky speculative investments. Their conservative lending practices help maintain financial stability in the community, preventing sudden credit freezes that can devastate small businesses.
- Keeping Wealth Within the Community
When customers deposit money in a local bank, those funds are more likely to be recycled back into the community through loans and investments. In contrast, national banks may redirect deposits to financial markets or large corporate borrowers elsewhere. This recirculation of capital ensures that wealth generated locally stays local, fostering sustainable economic development.
Conclusion
Local banking has a profound and multifaceted economic impact on communities. By supporting small businesses, creating jobs, financing real estate, promoting financial inclusion, and retaining wealth within the region, community banks contribute to long-term prosperity. Policymakers and consumers should recognize the value of local financial institutions and consider banking locally to sustain vibrant, resilient economies.
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Kent County, MD |
Cecil County, MD |
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Queen Anne's County, MD |
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Kent County, DE |
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Harford County, MD |
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Anne Arundel County, MD |
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Baltimore County, MD |
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New Castle County, DE |
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Total Domestic Deposits 2023 Total Domestic Deposits 2018 Total Domestic Deposits 2013 Total Domestic Deposits 2008 Total Domestic Deposits 2003 Total Domestic Deposits 1998
Branch Domestic Deposits National Member Banks State Member Banks State Nonmember Banks Foreign Chartered Institution Savings Banks State Charter State Stock Savings and Loans Savings Associations
Number of Branches National Member Banks State Member Banks State Nonmember Banks Foreign Chartered Institution Savings Banks State Charter State Stock Savings and Loans Savings Associations
Branch Domestic Deposits by Bank Type Full Service - Brick and Mortar Office Full Service - Retail Office Hosted Online Banking Mobile and Seasonal Office Limited Service - Drive-through and Facility Other Limited Service Locations
Number of Branches by Bank Type Full Service - Brick and Mortar Office Full Service - Retail Office Hosted Online Banking Mobile and Seasonal Office Limited Service - Drive-through and Facility Other Limited Service Locations
|
390,907,082
329,818,999
348,804,489
63,469,585
54,331,835
32,619,662
342,868,943
8,384,601
33,322,446
0
6,331,092
0
0
95
25
6
0
31
0
0
161,822,196
0
0
0
11,664
0
119
0
0
0
2
15
|
27,025,823
18,242,042
15,873,068
11,546,540
9,525,961
7,638,829
13,946,958
4,918,710
7,030,824
0
1,129,331
0
0
81
41
28
0
18
0
0
25,784,643
1,241,180
0
0
0
0
160
4
0
0
3
0
|
15,166,971
12,519,433
10,586,276
6,268,897
4,698,022
3,365,190
7,616,873
3,359,183
3,723,695
0
467,220
0
0
61
24
26
0
8
0
0
15,039,625
127,346
0
0
0
0
110
7
0
0
0
1
|
4,666,049
3,634,934
2,933,878
2,270,288
2,065,567
1,556,162
2,405,247
982,332
1,278,470
0
0
0
0
18
8
14
0
0
0
0
5,002,568
0
0
0
0
0
44
0
0
0
0
0
|
2,661,306
1,399,446
1,252,410
2,592,429
1,606,559
1,481,188
1,505,750
0
71,843
0
1,083,713
0
0
16
0
1
0
8
0
0
3,411,905
0
0
0
0
0
29
0
0
0
0
0
|
1,451,127
1,030,290
903,667
746,347
544,922
391,078
848,346
0
602,781
0
0
0
0
7
0
8
0
0
0
0
1,552,796
0
0
0
0
0
16
0
0
0
0
0
|
939,313
1,044,588
770,603
1,030,656
862,670
676,223
851,846
0
87,467
0
0
0
0
6
0
3
0
0
0
0
1,219,680
0
0
0
0
0
14
0
0
0
0
0
|
777,210
578,015
527,164
496,491
401,063
316,654
341,141
0
436,069
0
0
0
0
2
0
9
0
0
0
0
771,743
0
0
0
0
0
10
0
0
0
0
0
|
Sources: STI: PopStats and STI: Colossus
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