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When choosing a bank, there are literally thousands available in the United States. However, when it comes to the size of the institution, they can be narrowed down into just a few categories.
Regional banks are in a category between large national banks and community financial institutions. In this article, we'll define what a regional bank is and we'll go through some of the pros and cons of using a regional bank as your primary financial institution, as opposed to the other types of banks.
A regional bank is a financial institution that has a presence in one or more regions within the United States. For example, a regional bank may operate in a few states in the Southeastern U.S.
The Federal Reserve groups banks into categories based on the amount of assets on their balance sheet. The formal definition of a regional bank is one with between $10 billion and $100 billion in assets. This is in between community banks and large national banks. We'll get into the categories of banks in the next section.
Regional banks have FDIC insurance and typically provide most of the same services that larger national banks do. They generally offer deposit accounts, loan products, business banking services, ATM networks, and more. Some offer investment banking and wealth management services.
Here are a few examples of regional banks:
M&T Bank originated in Buffalo, New York in 1856. It has since evolved into a bank with 700 branches and 1,800 ATMs located in 10 states and Washington, D.C. with a concentration in the Northeastern United States.
First Citizens Bank operates a network of more than 1,000 branches located in 19 states. About 80% of its branches are located in North and South Carolina. In addition to its core presence in the Southeast, First Citizens also has a substantial presence along the West Coast with branch networks in California, Oregon, and Washington State.
There are four major categories of commercial depository institutions (banks) that operate in the United States:
National bank - A national bank designation is technically based on the type of charter a bank has. However, the term is typically defined as being a bank that has a presence throughout most (but not necessarily all) of the country. Some national banks have several trillion dollars in assets. Chase, Bank of America, and Wells Fargo are some well-known examples of national banks.
Regional bank - A bank that operates in one or more regions of a country but doesn't have a nationwide presence. Regional banks typically have a full range of banking products for consumers and businesses. Some offer investment banking services as well. Regional banks are typically regarded as those with between $10 billion and $100 billion in total assets.
Community bank - A bank that is usually locally owned and operated. While there is no formal definition, community banks typically have less than $10 billion in total assets. 94% of all commercial banks in the United States fall into this category.
Credit union - A credit union is a depository institution that is very similar to other types of commercial banks. The big difference is that credit unions are nonprofit corporations owned by their members. Credit unions are typically thought of as being relatively small in size, but there are larger-scale credit unions as well.
The decision of which bank to use goes beyond the size of the institution -- it's important to find a bank that best meets your needs. However, there are some general advantages and drawbacks to using a regional bank as your primary financial institution that you should be aware of.
Regional banks have broader branch and ATM networks compared with their community bank counterparts. They also tend to have more resources to invest in things like technology (including mobile apps for bank members), and often offer more product variety.
On the other hand, regional banks tend to be more locally oriented than their large-scale national bank counterparts. They tend to take more of an interest in charitable causes in a specific region, and often have proprietary lending programs designed to appeal to customers in their specific region.
Another common advantage is cost. Regional banks often charge lower fees on products like checking accounts and loan originations in order to entice customers away from the big banks, and may also offer higher interest rates on savings accounts and CDs.
While regional banks often have hundreds of branch locations and ATM machines, they might not be the most convenient if you travel regularly. For example, if you're a customer of Northeast-based M&T Bank and regularly travel to the West Coast, a national bank might be more convenient for you. The same can be said if you might be moving within the next few years.
Regional banks typically offer more products and services than community banks. However, they generally don't have the product depth that national banks do. For example, most of the big banks offer investment services and many even have their own brokerage platforms. For example, Bank of America operates the Merrill Edge investment platform. You’re less likely to find services like this being offered by a regional bank.
The Federal Reserve defines a regional bank as one with $10 billion to $100 billion in assets. On the other hand, a community bank is one with less than $10 billion. In practice, regional banks are those that have a multi-state presence but located in specific regions of the country. Community banks generally have a localized presence, often operating a branch network in one state.
The short answer is that it depends on what features are important to you. If you regularly travel to different regions of the country, for example, a national bank might be the better option. On the other hand, if you prefer the feel of a smaller institution but still want a variety of products and services, a regional bank might be just what you're looking for. And it's also worth noting that regional banks fall into a broad category, so it's important to shop around to see which one best meets your needs.
One good example is M&T Bank. It originated in Buffalo, New York but has since grown to manage 700 branches and 1,800 ATMs. It has locations in 10 states and Washington, D.C. with a concentration in the Northeastern United States. So, M&T doesn't have a national presence, but it has a pretty large network that covers most of one region of the United States. M&T also offers a wide variety of banking products, much like a national bank would.
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