Explaining Regional Bank and How It Differs from a National Bank

Regional banks are called so because, in the past, they usually worked in just one part of the country. The Federal Reserve now says that these banks have assets between $10 billion and $100 billion, but that's not always true. The key difference between regional and national banks is mainly in how much money they have, not where they operate or what they do.

The 12 financial institutions in the US Federal Reserve System, often called regional banks, might sound like the regional banks we've been talking about, but they're different. These banks focus on overseeing business lenders in specific areas and are named after the regions they're in. Let’s discuss it in detail.

What is a Regional Bank?

A regional bank is a decent-sized financial institution that typically has multiple branches in a specific area, like the US Midwest or Texas. According to the US Federal Reserve Board, these banks are considered regional if they have total assets ranging from ten million dollars to a hundred billion dollars.

Regional banks are usually larger than local banks (those with assets under $10 million) but smaller than national or multinational "money center" banks. They offer some benefits and flexibility similar to bigger national and international banks while also providing personalized services, much like community banks do.

What Kinds of Services Are Provided by Regional Banks?

Regional banks typically offer the majority of the services that customers expect from a financial institution. In fact, they often provide the same products as national banks while maintaining the personalized connections characteristic of community banks. Numerous regional banks should offer the following services and products:

Deposit Account

Checking, savings, money market, and certificate of deposit (CD) accounts are all types of deposit accounts. These are common ways people store and manage their money with a bank.

Loan Products

Smaller banks often offer a variety of loan products, including mortgages, vehicle loans, payday loans, and home equity loans. These loans serve to different financial needs and goals of their customers.

Business Banking

Many regional banks not only offer personal banking services but also provide business banking services, especially serving small enterprises. This allows them to support both individual customers and local businesses in their communities.

Credit Cards

Depending on the bank, many regional banks offer credit cards, some of which come with additional perks and incentives. It adds a bit of extra benefit for customers who choose to use their credit cards for various transactions.

Regional Banks vs. Community Banks vs. National Banks

Let's have a look at the key differences among the three.

Community Banks vs. Regional Banks

The Federal Reserve makes a clear distinction between community banks and regional banks. A community bank has assets under $10 billion, while a regional bank falls in the range of $10 billion to $100 billion.

Consumers may notice more distinctions between the two as well. Community banks might offer fewer services compared to regional banks. While they may lack investment or insurance options, they often provide similar deposit and lending choices as local banks. It's all about finding the right fit for individual financial needs and preferences.

Another notable difference often lies in the geographic areas served by community banks and regional banks. Larger banks, like regional ones, tend to operate in broader geographic regions compared to community banks. While this isn't the sole defining factor, it's a trend that can influence the reach and scope of banking services in different communities.

Comparing Regional and National Banks

The distinction between national and regional banks isn't solely based on the quantity of assets. A national bank, as defined by the federal government, is one that has obtained a charter from the FDIC, the Federal Reserve, and the OCC. This means that a regional bank could, theoretically, also be a national bank by meeting these criteria.

However, people often distinguish national banks by their nationwide operations, serving the entire country, whereas regional banks typically focus on specific regions. It's a combination of regulatory status and operational scope that helps differentiate the two.

National banks, operating on a nationwide scale, tend to be significantly larger than regional banks, often boasting assets in the hundreds of billions or even trillions of dollars.

In addition to a broader range of consumer and business products, such as deposit accounts, national banks often provide investment and business banking services. Big names like Chase Manhattan, Bank of America, Citibank, and Wells Fargo Corporation are examples of these large, nationally operating institutions. Their extensive services and widespread presence make them key players in the banking landscape.

What are the Benefits of Regional Banks

The following are the benefits of having regional banks.

Access to branches and ATMs

It's a strong suit for regional banks, often boasting of a sizable network acquired through mergers. They also tend to partner with additional ATM network operators, ensuring availability comparable to national banks. This even extends to international travel, where regional banks typically have in-network ATMs accessible.

Technology

It is another area where regional banks shine. They leverage cutting-edge banking services, using both their expertise and financial resources. This agility, combined with their size, allows them to swiftly launch services like digital person-to-person transfers and mobile deposits through user-friendly smartphone apps.

Fees and Rates

When it comes to fees and rates, regional banks often offer competitive rates because of their flexibility. They can excel in key product categories such as CDs, money market accounts, and savings. Plus, their costs are likely to be competitive, given their interactions with both community lenders and larger banks. It's all about providing customers with a well-rounded and cost-effective banking experience!

The Bottom Line!

The role of regional banks is crucial for customers. Many people find all the services they need from their local regional bank. Interestingly, even though these banks have a stronger local focus compared to large national banks, they often have more branches and services.

When opening a savings account at a nearby bank, it's a good idea to make sure that your deposits are below the $250,000 limit for FDIC insurance. This ensures that your money is fully protected. If you have additional funds to deposit, you might consider creating a separate account at another bank for added security. It's all about making sure your money is in safe hands!