By the numbers - Mega Banks vs. Community Banks - Extractable (2024)

FAQs

What is the difference between a community bank and a mega bank? ›

By investing in the local community, small banks can create jobs, support local businesses, and contribute to the economic growth of the area. On the other hand, mega banks may focus more on larger businesses and investments, leading to a lack of focus on local and rural economies.

Community banks represent 97% of banking industry. 2,258 Community Banks headquartered in smaller, rural counties with populations < 50,000.

What Sets Community Banks Apart. Local Focus: Unlike larger banks that may take deposits in one state and lend in others, community banks channel their loans to the neighborhoods where their depositors live and work, which helps local businesses and communities thrive.

In recent years, that trend has continued. In Q3 of 2021, for example, there was a net reduction of 130 community bank charters, leaving only 4,752 community banks active nationwide, according to a report by Banking Strategist.

Limited number of products and services: While community banks typically offer deposit products and loans, they might not have some of the specialized products more commonly offered by big banks such as credit cards and investment services.

You can bank with confidence at your local community bank because no one has ever lost a dime of FDIC-insured funds. Community banks hold FDIC deposit insurance, which covers each depositor's account, dollar-for-dollar, up to the insurance limit ($250,000).

Many factors have contributed to this steady decline, including mergers and acquisitions, bank failures, and higher regulatory costs. However, as community banks have steadily declined, the number of large financial institutions has more than tripled in the past two decades.

Eighty-five percent of community bank executives listed cybersecurity as a top risk priority, with credit risk close behind at 84%. Respondents also cited operational risk (65%), IT risk (62%), interest rate risk (57%) and regulatory compliance risk (50%).

Thanks to FDIC insurance, they are just as safe as larger competitors. And right now they're competing harder than ever for your dollars—which means you're more likely to get great rates on top of more personal customer service.

Community banks charge fewer fees and offer more free accounts. Many do not have a monthly maintenance fee and keep overdraft fees to a minimum.

Are local banks better than big banks? ›

Lower Fees: Local banks and credit unions offer more free accounts and charge fewer fees. According to Money-Rates.com, 43 percent of small banks' checking accounts had no monthly maintenance fees compared to only 25 percent at large banks. Overdraft fees and ATM fees continue to rise in the megabank world as well.

Decades of low interest rates squeezed banks' profits. Many opted to cut costs by closing branches. The pandemic triggered a massive migration to digital banking. Large banks vying for market share often acquire smaller banks to expand their footprint.

Unlike banks that may take deposits in one state and lend in others, community banks channel most of their loans to the neighborhoods where their depositors live and work, helping to keep local communities vibrant and growing. Community bankers are typically deeply involved in local community affairs.

The bank's problems became public after it said it was experiencing system disruptions that affected most of its services creating a backlog since last week. This triggered panic withdrawals raising fears that it was headed for a bank run.

Community banks tend to emphasize relationships and even family histories when making lending decisions, whereas larger banks rely more on credit scores, income, and other quantitative data.

Savings accounts are a safe place to keep your money because all deposits made by consumers are guaranteed by the FDIC for bank accounts or the NCUA for credit union accounts. Certificates of deposit (CDs) issued by banks and credit unions also carry deposit insurance.

Community banks exist in all 50 states. The highest concentrations of community banks are located in Texas (407), Illinois (405), Minnesota (279), Iowa (271), and Missouri (244), according to Banking Strategist.

“Community banking customers can continue to bank with confidence knowing their money is safe because it is insured by the FDIC. Since the FDIC was founded in 1933, no one has ever lost a penny of FDIC-insured funds.” The FDIC insures deposits and protects depositors' funds in banks and savings associations.

A Frost Bank survey found that only 11% of people felt a sense of financial belonging with their banks, but 44% of respondents say they won't change banks. “Most people feel that knowledge is a big inhibitor for them feeling belonging. They just don't know what some banks offer," Green said.

This slowed significantly from 2015 to 2020, when the U.S. saw an average of fewer than five bank failures per year. Zero banks failed in both 2021 and 2022. Bank collapses were similarly uncommon in the early 2000s. From 2001 to 2007, the U.S. saw an average of just 3.57 bank failures per year.

What is safer than banks? ›

Yes. Generally speaking, credit unions are safer than banks in a collapse. This is because credit unions use fewer risks, serving individuals and small businesses rather than large investors, like a bank.

The major risks faced by banks include credit, operational, market, and liquidity risks. Prudent risk management can help banks improve profits as they sustain fewer losses on loans and investments.

Credit risk is the most obvious risk in banking, and possibly the most important in terms of potential losses. The default of a small number of key customers could generate very large losses and in an extreme case could lead to a bank becoming insolvent.

Chase. One of the biggest banks, Chase, is also one of the most secure banks to keep your money safe. Chase offers Zero Liability Protection, so if unauthorized transactions are made under your name, you won't be held responsible.

Private banking embodies a number of risk factors: (1) operational risk, (2) reputation risk, (3) legal risk, (4) relationship risk, and (5) credit risk. The combination of more competition and increasingly complex products offering higher yields, which further exacerbates these risks.

There are downsides to big banks. In some cases, larger financial institutions may offer less competitive rates on loans and charge larger fees than community banks or small credit unions. If you take out a loan with a big bank, it might take longer to process, too.

Community banks play a vital role in the functioning of the U.S financial system and the broader economy, from lending to small business owners and farmers, to providing critical banking services in small towns and rural communities across the nation.

A good bank is one that: Gives you easy access to your money. Doesn't charge exorbitant fees. Offers a good interest rate on your savings.

But for most customers, big banks are not necessarily any “safer” than other federally insured financial institutions. This is mainly because most bank deposits are protected by the Federal Deposit Insurance Corporation (FDIC), which insures up to $250,000 per depositor (joint accounts are insured up to $500,000).

Are local banks more or less secure than regional or national banks? As with bigger institutions, local banks are safe banking options as long as they're federally insured. Banks are insured by the FDIC, and credit unions are insured by the NCUA.

What is the #1 bank in America? ›

JPMorgan Chase. Headquarters: New York, N.Y. JPMorgan Chase is the largest bank in the U.S., with roughly $3.20 trillion in consolidated assets.

The collapses of First Republic Bank, Silicon Valley Bank and Signature Bank were the second-, third- and fourth-largest bank failures in the history of the United States, respectively, smaller only than the collapse of Washington Mutual during the 2007–2008 financial crisis.

These alternative models include prepaid cards, non-bank lending, and leveraging existing networks like mobile telephony to transfer value. The ubiquity of smartphones and digital transactions has widened and broadened the competitive playing field of companies that are capable of providing financial services.

Wells Fargo (WFC)

Nevertheless, it finds itself as one of the least likely financial institutions to fail.

Despite the recent uncertainty, experts don't recommend withdrawing cash from your account. Keeping your money in financial institutions rather than in your home is safer, especially when the amount is insured. “It's not a time to pull your money out of the bank,” Silver said.

The short answer is no. Banks cannot take your money without your permission, at least not legally. The Federal Deposit Insurance Corporation (FDIC) insures deposits up to $250,000 per account holder, per bank.

March 2023 Bank Failures—Risky Business Strategies Raise Questions About Federal Oversight. When Silicon Valley Bank and Signature Bank failed in March, they suffered two of the largest bank failures in U.S. history.

A megabank is a bank that is controlled by a board of directors and is owned by stockholders. An excellent example of a megabank is Wells Fargo.

For example, community banks focus on providing traditional banking services in their local communities. They obtain most of their core deposits locally and make many of their loans to local businesses. For this reason, they are often considered to be “relationship” bankers as opposed to “transactional” bankers.

Noun. megabank (plural megabanks) (informal) A major bank (financial institution).

What type of bank is Mega Bank? ›

Mega Bank is a Chinese American community bank opening for business in February 2008. Our board of directors is composed of experienced bankers who have had successful careers with community banks in the San Gabriel Valley.

Bank of America, Citibank, Union Bank, and HSBC, among others, have created accounts that come with special perquisites for the ultrarich, such as personal bankers, waived fees, and the option of placing trades. The ultrarich are considered to be those with more than $30 million in assets.

1. JPMorgan Chase. Chase Bank is the consumer banking division of JPMorgan Chase. It currently has more than 4,700 branches and more than 16,000 ATMs.

Wells Fargo officially divides its operations into three categories for management reporting purposes: Investing and wealth management, wholesale banking, and community banking.

Community banks charge fewer fees and offer more free accounts. Many do not have a monthly maintenance fee and keep overdraft fees to a minimum.

Regional and community banking organizations constitute the largest number of banking organizations supervised by the Federal Reserve System.

Mr.

Ishwar Bahadur Gurung is the Founder Promoter of Mega Bank Nepal Limited and has been instrumental in the set up of the Bank. He has decades of experience in Business Management and Leadership.

The bank was established with a vision to establish a national level financial institution that would provide the highest levels of professional banking service with a personal touch, to all Nepalese throughout the nation.

Nepal Investment Bank Ltd (NIBL) and Mega Bank have started joint operations from today following a successful merger between the two banks. Organising a press conference here today, the two banks officially announced the start of joint operations under the new name - Nepal Investment Mega Bank Ltd (NIMB).

Pathward (previously known as MetaBank) is a United States bank with retail branches in Iowa and South Dakota. It offers traditional banking services designed to serve the needs of individual, agricultural, and business depositors and borrowers. Pathward Financial, Inc.