Earning Interest
Locally rooted financial institutions thrive by ensuring the vitality of surrounding communities
by Jennifer Updike

Farmers, food purveyors and goods manufacturers encourage the people in their communities to “buy local.” Doing so, they suggest, creates jobs and opportunities for growth; builds a stronger community; and enhances the health and wealth of the people who live locally.

The phrase might be amended to read “invest local,” because it also applies to local financial institutions, meaning the community bank rooted in the communities in which they do business, where their officers and decision makers live, work and play. Just as with farmers and other producers of consumable goods, the reasons for investing money locally are many.

Community Banks Keep Local Money Local: Member deposits generally stay in the community, where it is used by other members to, say, launch a startup business or buy a house. Approximately 95 percent of a typical community bank’s loan portfolio is reinvested in the community, usually within 50 miles of a bank office and almost entirely within the state borders, according to the Pennsylvania Association of Community Bankers (PACB), which is based in Harrisburg. The average community bank in Pennsylvania, PACB suggests, has more than 30 percent of its holdings in commercial loans with local businesses, and more than 50 percent in mortgage loans to local homeowners.

Community Banks Listen: With larger banks, entrepreneurs often report running into restrictions that can prohibit them from receiving a business loan, whereas community bankers strive to work with entrepreneurs as long as they have a good track record and responsible business plan with ideas for growing their business. Community bankers listen to entrepreneurs’ needs, evaluate their individual situation and use their knowledge of the local community to either provide flexible financing options or direct them to another source that can help them. Community banks also often poll their customers about requests for new products and services.

Community Banks Care: With most community banks, the people they employ—from the tellers to the officers, board members and president—are based in and deeply involved in the community. This includes local chambers of commerce, Rotary clubs and other networking organizations, and they also tend to support the likes of Little League, community 5K races and locally based cultural institutions, such as museums. The more involved an organization is in the community, the more it becomes exposed to new blood that can spur growth.

Community Banks are Accessible:
Community banks take great pride in knowing their customers; each strives to adopt a “Cheers”-like atmosphere, where even the bank’s officers know their customers’ names. In addition, many locally based banks host special events where customers have direct access to bank officers so they can converse about how the bank can better serve its constituents. In some locations, it’s possible to speak to the bank’s president simply by walking into the lobby.

Community Banks Compete on Service and Services: Although many larger banks offer a comprehensive range of products, programs and services, including expanded hours on nights and weekends, community banks have kept pace. Customer rewards and technology—from 24-hour banking to mobile apps that enable customers manage their money directly from smartphones—have become increasingly part of community banks’ service strategies. In some cases, smaller banks might be first to market with a new, cutting-edge service because of their scale and flexibility.

Events from the not-too-distant past continue to play a role in community banks’ vitality. Mistrust of so-called “mega-banks” seems to have carried over from 2008, when the investment decisions of some mega-banks contributed to the U.S. financial crisis. Seventy-one percent of a December 2013 Harris poll of more than 1,000 U.S. adults, commissioned by more than 200 community banks and credit unions, said they believe big banks haven’t made up for their role in the lingering economic downturn. Among megabank customers, 26 percent of poll respondents said they sometimes felt guilty for doing business with a big bank. Furthermore, 23 percent of mega-bank customers said they were at least somewhat likely to switch their checking account to a local community bank or credit union in 2014.

When choosing a financial institution, regardless of its size or location, customers should first ensure that the institution suits their needs in terms of competitive services. In addition, one might also consider how investing with a locally based firm will affect not only his or her bank account but also the neighborhood and businesses that have contributed to the vibrancy of Main Street, USA.

Financial Resource Guide
The following locally based banking institutions and financial planners excel at helping their clients achieve their goals, financially speaking. Whether it’s to save for a new home, get a new business off the ground, achieve a comfortable retirement or otherwise ensure a prosperous future, these organizations can help.

Cape Bank
Visit capebanknj.com for details on commercial lending services and locations throughout New Jersey.

Fairman Family Group Office
899 Cassatt Road, Suite, 115, Berwyn
610-889-7300 | fairmangroup.com

First Federal of Bucks County
Visit firstfedbucks.com for more information on locations throughout Bucks County.

Fulton Bank
Visit fultonbank.com for more information on locations throughout the Philadelphia suburbs.

Harvest Group Financial Services Corp.
215-860-6056 | harvestgroupfinancialservices.com

The Haverford Trust Company
610-995-8700 | haverfordquality.com

The Manchester Group
610-567-1934 | manchesterw@stifel.com

McNamara Financial Group
215-348-3176 | mcnamarafinancialgroup.com

Royal Alliance Associates
610-896-9919 | robertmorris@jrmorris.com