Governor Michelle Bowman’s Vision for the Future of Community Banking
In her recent address at the Robbins Banking Institute Lecture Series in Hays, Kansas, Governor Michelle W. Bowman articulated a comprehensive vision for the future of community banking in the United States. Drawing from her extensive experience as a former community banker and state bank commissioner, Governor Bowman underscored the indispensable role that community banks play in fostering local economic growth and maintaining the vitality of their communities.
Defining Community Banks
Community banks are generally defined as banking organizations with less than $10 billion in total assets. These institutions are characterized by their deep-rooted presence in local communities, offering personalized banking services and building enduring relationships with their customers. Unlike larger national banks, community banks prioritize local decision-making, which enables them to tailor their services to meet the specific needs of the communities they serve.
The Prevalence and Economic Impact of Community Banks
As of December 31, 2024, there were 4,700 community banks in the United States, comprising approximately 97% of all banks in the country. Collectively, these institutions held a significant portion of total domestic deposits, emphasizing their essential role in the nation's financial landscape.
Community banks serve a diverse range of communities, including small towns, rural areas, and metro regions. While they are often associated with smaller markets, many also operate in larger cities, providing relationship-based banking services tailored to local needs. Governor Bowman emphasized that without this diverse banking ecosystem, 30% of American communities would lack access to a physical bank location, highlighting their crucial role in ensuring financial inclusion.
Asset Size Distribution of Community Banks
Community banks vary in scale, and their asset distribution provides insight into their economic impact:
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Under $100 Million: Approximately 21% of community banks fall into this category.
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$100 Million to $1 Billion: Around 67% of community banks have assets within this range, making up the majority of institutions.
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$1 Billion to $5 Billion: About 12% of community banks are in this bracket, accounting for 35% of all community bank branches and 40% of community bank assets.
This distribution illustrates the diverse scale at which community banks operate, reflecting their adaptability and vital role in serving various financial needs across different communities. While many community banks remain small institutions, those in the $1 billion to $5 billion range hold a significant portion of total community bank assets and maintain a broad presence in the financial sector.
Governor Bowman's Vision for Community Banking
In her speech, Governor Bowman outlined several key areas to support and enhance the role of community banks:
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Regulatory Tailoring: Recognizing that a one-size-fits-all regulatory framework can disproportionately burden smaller institutions, Governor Bowman advocates for regulations that are appropriately tailored to the size, risk profile, and business model of community banks. This approach aims to alleviate unnecessary compliance costs and operational challenges, enabling these banks to compete more effectively and continue serving their communities.
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Technological Innovation: Governor Bowman highlighted the importance of embracing technological advancements to meet evolving customer expectations. She encourages community banks to adopt innovative solutions that enhance service delivery while maintaining the personalized touch that distinguishes them from larger competitors. This includes investing in digital banking platforms, cybersecurity measures, and fintech partnerships, such as AI-driven risk assessment tools and real-time fraud detection, that can expand product offerings and improve operational efficiency.
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Community Engagement: Emphasizing the symbiotic relationship between community banks and their localities, Governor Bowman calls for sustained engagement and investment in community development. By supporting local businesses, participating in community events, and providing financial education, community banks can reinforce their role as trusted partners in economic development.
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Workforce Development: To ensure the continued success of community banks, Governor Bowman stresses the need for attracting and retaining talented professionals who are committed to community banking values. This involves offering competitive compensation, opportunities for professional growth, and fostering an organizational culture that prioritizes customer service and community involvement.
Governor Bowman's vision reflects a commitment to preserving the unique strengths of community banks while equipping them to navigate the challenges of a dynamic financial environment. By advocating for tailored regulatory approaches, technological innovation, active community engagement, and robust workforce development, she aims to ensure that community banks remain integral to the economic and social fabric of towns and cities across the nation.
Read Governor Bowman's full speech here.