What are Community Banks?
And Where Can You Find One?
The misdeeds of many large financial-service corporations have inspired people to seek alternatives to large banking conglomerates. Credit unions and community banks are frequently cited as better stewards of customer deposits, as well as for serving their clients with better lending terms and being more focused on the needs of local residents and businesses.
As cooperative financial institutions owned and operated by members, credit unions are found in most U.S. cities. These fairly familiar collectives may be linked by a county or a place of employment.
Community banks, however, are more of a mystery. Often equated with credit unions because they provide borrowing and savings opportunities, there are, in fact, a variety of organizations that may be described as community financial-service institutions.
In general, community banks focus attention on the needs of local families, businesses, and farmers. They use deposits to make loans to the neighborhoods where their depositors live and work. Community banks’ boards of directors are made up of local citizens who want to advance the interests of the towns and cities where they live and where the bank does business.
Speaking more broadly, Community Investment Institutions, or CII's, serve people throughout the world by providing borrowing and saving opportunities with a specific mandate to put investor capital to work in its local community.
Here’s a rundown of CII's:
Community Development Banks provide capital to rebuild and develop low-income communities. As regulated institutions, they offer federally insured products and services similar to traditional banks, but with a focus on community development.
Similarly, Community Development Credit Unions serve individuals and communities with limited access to financial services. They are also regulated, offer the same products and services as conventional credit unions, and their accounts are federally insured.
In contrast, Community Development Loan Funds are nonprofit or private organizations. As unregulated financial intermediaries, they finance community development projects and provide technical assistance to borrowers.
More globally, International Community Development Funds are nonprofit, U.S.-based intermediaries that channel investor dollars to locally based institutions around the world that provide financing and assistance to underserved individuals, small enterprises, and communities around the world.
Community Development Venture Capital Funds may be for-profits, non-profits, limited partnerships, or limited liability companies, but they all make equity and equity-like investments in entrepreneurial new businesses to create jobs and wealth in disadvantaged communities.
Community Development Pooled Funds are intermediaries that spread investor capital over a number of CIIs, thus creating a diversified and less risky investment.
Finally, Community Development Bond Funds are mutual funds that invest in fixed-income securities supporting community development in low to moderate income areas.
If you’re ready to find a community bank or CII, use this tool: http://www.communityinvestingcenterdb.org/.
Also, simply try a Google search, such as “Wisconsin community bank.”
