Regional banks play a multifaceted role in the national financial ecosystem and the communities they serve. They are typically defined as institutions with $10 billion to $100 billion in assets. These banks provide a wide range of financial products and services, making them indispensable to individuals and businesses in the areas where they are located.
Here’s what you should know about regional banks, how they work, the potential advantages of regional banks, and more.
Overview
What is a regional bank?
A regional bank is a financial institution that typically serves a specific geographic area, such as a state or a particular region of a country. They are larger than community banks but operate on a smaller scale than national or international banks.
Regional banks often emphasize personalized banking experiences and a better understanding of the target markets they serve. While they might have fewer branches than national banks, regional banks typically offer many services that are similar to larger institutions, including online banking, debit cards, high-interest savings accounts, and certificate of deposit (CD) options.
Local vs. regional bank
What is the difference between a local bank and a regional bank?
Local banks typically serve a single community, city, or county, and focus on lending to and serving the needs of people and businesses in that specific area. On the other hand, regional banks have a broader reach than local banks, operating across a specific state or multiple neighboring states within a region.
Local banks are typically quite a bit smaller than regional banks, often with total assets of less than $10 billion. While regional banks offer many of the same services as their national counterparts, local banks often provide only essential services like checking accounts, savings accounts, and loans. Regional banks often prioritize building customer relationships and providing a personalized experience, but may operate on a slightly larger scale and have a more standardized approach than local banks.
Advantages
Potential advantages of a regional bank
Regional banks are knowledgeable about the local economy, allowing them to provide tailored financial products and services. For instance, a regional bank in a specific area might specialize in loans relevant to the local industry. Loan decisions can be made more quickly and with greater flexibility at regional banks because they are often made locally by those who understand the community.
Regional banks are often a significant source of credit for small and medium-sized businesses in their areas, which can contribute to job creation and economic growth. Compared to national banks, regional banks may have lower average fees and offer more competitive interest rates on loans and savings accounts.
Many regional banks are actively involved in supporting local communities through sponsorships, charitable contributions, and financial literacy programs. They are often deeply rooted in the communities they serve and invest in initiatives that enhance the overall quality of life in the area.
Related investing topics
Examples
Regional banks in the real world
Publicly traded regional banks play a significant role in the U.S. financial landscape. U.S. Bancorp (USB -0.93%) is the largest regional bank and the fifth-largest bank in the country. The bank focuses primarily on the West and Midwest, with a strong focus on commercial loans and mortgages.
PNC Financial Services Group Inc (PNC -1.24%) is another large regional bank with operations in numerous states, and is known for its wealth management services. In 2021, PNC acquired BBVA USA, boosting its presence in the Southwest and expanding into new markets like Arizona, California, and New Mexico.
Truist (TFC -0.28%) is also a major player in the regional bank stock space. It was created from a merger of BB&T and SunTrust. Truist operates mainly in the Southeast and Mid-Atlantic regions.
The overall health of the U.S. economy significantly influences the financial performance of regional banks. Regional banks, like most banks, are also sensitive to interest rate fluctuations. Changes in interest rates affect net interest income, which is a major source of revenue for these institutions.
