Regional banks are midsized financial institutions that typically serve a certain geographical area, such as a state or a particular region of the country. They occupy a middle ground between smaller community banks and large national banks and can offer a personalized approach, as well as a relatively large number of financial products and services.
While regional banks may not have a national footprint, they can offer a number of benefits that can make them an appealing option for both individuals and businesses, though they may not always have the services customers are looking for. Here are key things to know about regional banks.
Key Points
• Midsized regional banks are those, per the Federal Reserve, that have between $10 billion and $100 billion in assets and typically serve specific geographic areas.
• Regional banks tend to provide financial services like loans, credit cards, and investment products, with fewer branches than national banks.
• They are typically FDIC-insured, ensuring deposit protection up to $250,000 per account owner and category at an insured institution.
• Regional banks may face challenges from national and online banks, regulatory pressures, and economic vulnerabilities.
• They can positively impact local economies by providing loans to small businesses and reinvesting in communities.
What Is a Regional Bank?
As defined by the Federal Reserve, regional banks are those that have between $10 billion and $100 billion in total assets. This makes them larger than community banks, which have assets under $10 billion, but smaller than national banks, which can have assets in the trillions.
Regional banks typically operate within a specific geographic region, which might be one or two states, several states, or a defined area like the Midwest or East Coast. For example, Prosperity Bank, headquartered in Houston, serves customers in two states (Texas and Oklahoma), while Zions Bank, based in Salt Lake City, serves what is known as the Intermountain West.
Unlike national banks, which often have a presence across the entire country, regional banks tend to focus on serving customers in their designated region or regions. They typically offer a variety of financial services, including checking accounts, savings accounts, personal and business loans, and sometimes investment products, and often serve as an important financial resource for local companies and industries.
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Characteristics of Regional Banks
Regional banks have some distinct features that separate them from other types of banks:
• Geographic focus: Regional banks often limit their operations to a specific geographic area. They may have branches across multiple states but generally do not extend their reach nationwide.
• Asset size: Regional banks hold more assets than community banks but less than national and international banks, usually ranging from a few billion to one hundred billion dollars.
• Range of services: Regional banks offer a broad array of financial services, including checking and savings accounts, loans, mortgages, credit cards, and business banking services. They may also provide investment products, though these offerings are usually not as extensive as those of larger banks.
• Local expertise: Regional banks tend to have a strong understanding of the economic conditions and needs of the areas they serve. This allows them to offer financial solutions tailored to local businesses and customers.
• Moderate branch networks: While regional banks have more branches than small community banks, their networks are usually less extensive than those of large national banks, averaging around 100. However, online and mobile banking allow customers to access their accounts from any location.
How They Differ From National and Community Banks
Banks generally fall into three size categories — community, regional, and national. While all three offer many of the same services, there are some key differences between them.
• Community banks are the smallest, with assets under $10 billion. They are typically chartered at the state (rather than the national) level. These banks focus on serving local communities and have a limited geographic footprint compared to regional and national banks. In addition, their product offerings may be less extensive and digital banking capabilities might not be as advanced as larger banks. However, community banks are known for their strong commitment to customer service and local engagement.
• Regional banks are larger than community banks, usually with between $10 billion and $100 billion in assets, and offer a broader array of products and services. They typically operate in multiple states but generally don’t have a national presence. Regional banks may be chartered at the state or federal level, depending on their size and operations.
• National banks operate under a federal charter regulated by the Office of the Comptroller of the Currency and are generally the largest banks in the U.S. These financial institutions usually have more than $100 billion in assets. They typically have extensive networks of branches across the country and offer a wide range of services, enabling them to meet the diverse needs of individuals, businesses, and institutions. National banks tend to be well-known names like JPMorgan Chase, Wells Fargo, and Bank of America.
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The Role of Regional Banks in the Financial System
Regional banks play a key role in the financial system by bridging the gap between community banks and large national institutions. They may provide a level of customized service that is often missing from big banks. At the same time, they offer a diverse range of financial products to meet the needs of individuals and businesses located within their region.
Crucially, regional banks often bring banking services to small towns and rural areas where larger financial institutions might not operate.
Services Offered by Regional Banks
Regional banks typically provide a variety of financial services for consumers and businesses and enable you to have multiple bank accounts under one roof. Here are some of products and services you can often find a regional bank:
• Checking accounts
• Savings accounts
• Money market accounts
• Credit cards
• Personal loans/credit lines
• Auto loans
• Mortgages
• Home equity loans
• Business banking
• Commercial loans
• Individual retirement accounts (IRAs)
• Taxable brokerage accounts
As you see, regional banks can offer a wide variety of financial products and services.
Advantages of Regional Banks
Regional banks can offer several benefits to their customers. Here are some to consider:
• Local expertise: Regional banks tend to have a strong understanding of the economic conditions and financial needs of their communities. This local knowledge can allow them to make more informed lending decisions and offer products that are well-suited to the area.
• Personalized service: Whether you need help opening a bank account or applying for a mortgage, regional banks often provide a level of personalized service that larger banks may lack. Customers can often build relationships with their bankers, who understand their financial history and needs.
• Competitive rates: Regional banks may offer more favorable interest rates on loans and savings accounts to compete with national banks.
• Digital and mobile banking: Like larger banks, regional banks typically provide digital and mobile banking options, allowing customers to manage their accounts, make payments, and transfer money between banks.
• Support for local businesses: Regional banks can play a crucial role in financing small and mid-sized businesses, which are essential for local economic growth. They often provide loans, credit lines, and other financial services to help businesses expand and create jobs.
• Community involvement: Many regional banks actively support local communities by sponsoring events, donating to charities, or offering financial education programs. This community involvement can help strengthen the bank’s relationship with its customers.
• FDIC insurance: Regional banks can benefit from the same Federal Deposit Insurance Corporation (FDIC) insurance that protects cash deposits at larger banks. This means your money is insured up to $250,000 per depositor, per account category, per insured institution in the very rare event of bank failure.
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Challenges Faced by Regional Banks
Despite their advantages, regional banks also face several challenges:
• Competition from national and online banks: Regional banks often compete with larger national banks that have more resources, larger branch networks, and a broader range of services. In addition, online banks are often able to offer better rates and fees, as well as more sophisticated digital banking options. This competition can make it difficult for regional banks to attract and retain customers.
• Limited reach: Regional banks often only serve a specific geographic area. This can be limiting for people who travel often, have multiple residences, or are relocating (which could lead to someone closing a bank account at a regional institution).
• Regulatory pressure: Due to the surprising recent failures of three regional banks (Silicon Valley Bank, Signature Bank, and First Republic Bank), U.S. bank regulators have stepped up their scrutiny and financial oversight of regional banks to help ensure that failures don’t happen again in the future. These occurrences are quite rare, and the government keeps a watchful eye to ensure the stability of U.S. banks.
• Technological advances: As digital banking continues to grow, regional banks may struggle to keep up with the technological innovations of larger banks and fintech companies. Limited resources can make it difficult to invest in advanced digital platforms and services.
• Economic vulnerability: Because they focus on specific regions, regional banks may be more vulnerable to economic downturns or sector-specific challenges within their service area. This can impact their financial stability. However, as noted, regional banks insured by the FDIC are safe places to keep your money up to the insurance limits.
The Impact of Regional Banks on Local Economies
Regional banks offer loans and credit to small and midsize businesses, helping to fuel local economic growth and job creation. In fact, regional banks serve as the source of nearly one-third of small business bank lending in the U.S, according to the Bank Policy Institute.
Many regional banks also reinvest in the communities they serve, whether through charitable donations, sponsorship of local events, or support for community development projects. This involvement helps strengthen local economies and fosters a sense of community that can help attract and retain both businesses and residents.
The Takeaway
Regional banks play an important role in the banking industry. They offer many, if not most, of the products and services you might find at a national bank but can provide a more personalized experience due to their midsize scale.
That said, regional banks may not offer every financial product or service you need. They also have smaller footprints than national banks, making them less practical if you travel frequently or may need to relocate in the near future.
If you’re considering opening a new bank account, also see what online banks offer.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
FAQ
How large is a typical regional bank?
Regional banks are banks with $10 billion to $100 billion in assets, typically making them larger than community banks but smaller than national banks. Regional banks usually operate within a defined geographic area, covering multiple states or a particular region of the country. They may offer more products and services than a community bank but generally not as many as you would find at a national bank.
Are regional banks FDIC-insured?
Yes, regional banks are typically insured by the Federal Deposit Insurance Corporation (FDIC). This means your deposits are protected up to the legal limit, which is $250,000 per account owner (co-owners of joint accounts are each insured up to $250,000), per account category, per insured institution. If you have money in an FDIC-insured bank account and the bank fails (a very rare occurrence), the agency reimburses you for any losses you incur, up to the insured limit.
Can I use a regional bank if I move out of the area?
Yes, you can generally still use a regional bank if you move out of the area. Regional banks typically offer online and mobile banking services, allowing you to manage your accounts and make payments from any location. However, access to physical branches may be limited or unavailable outside the bank’s primary service area. If in-person banking is important to you, it might be challenging to continue using a regional bank after moving out of the area.
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