In today’s world, community banks and credit unions serve individuals, small businesses, and communities. While they share a commitment to local needs, each institution has unique characteristics. Here’s a look at the fundamental differences between community banks, like Summit Bank, and credit unions, as well as the increasing competition credit unions pose in Oregon.
Understanding the Distinct Missions and Structures
Community Banks
Community banks like Summit Bank are privately or publicly traded for-profit institutions structured to reinvest earnings into their communities. Summit Bank is locally managed, supporting Oregon’s economic growth by serving small businesses, individuals, and nonprofits across Eugene, Central Oregon, and Portland Metro. Community banks hold approximately 13.6% of total banking assets in the U.S., though this share has declined in recent years due to mergers and increased competition from larger banks and credit unions. Community banks play a vital role in economic development by building long-term client relationships and providing highly personalized services tailored to regional needs.
Jenny Bennett, Executive Vice President and Market President of Eugene & Springfield, explains: “We believe community banks like Summit Bank stand out because of our commitment to personal service, deep local expertise, and strong client relationships. These qualities allow us to truly understand and support the unique financial needs of our communities.”
Credit Unions
Credit unions are nonprofit cooperatives owned by their members. This structure allows them to offer lower fees and competitive loan rates, as profits are redistributed to members rather than shareholders. Historically, credit unions served specific groups, such as company employees or community residents, but their membership criteria have since broadened significantly, permitting them to serve a more diverse range of individuals. Credit unions have seen steady growth in the past decade, reaching over 130 million members in 2023 with a 5% annual increase. Their total assets have outpaced community banks, partly because their tax-exempt status saves them an estimated $2 billion annually, enabling them to offer more attractive loan and deposit rates.
Comparing Services and Financial Benefits
Both community banks and credit unions offer a range of services, but their focus and benefits differ:
Lending Approach: Community banks like Summit Bank specialize in commercial loans, supporting local businesses and tailoring financial solutions that national banks often overlook. Community banks make nearly 60% of all small business loans in the U.S., reinforcing their commitment to local economic development. Credit unions, while providing business loans, focus more on consumer-oriented lending, such as auto loans and mortgages. However, credit unions have rapidly expanded into commercial lending, with commercial loan balances increasing by over 15% annually over the past five years, directly competing with community banks.
Rates and Fees: Credit unions have a pricing advantage due to their tax-exempt status, allowing them to offer loan rates that are typically 0.5% lower and deposit rates about 0.25% higher than those of community banks. This pricing edge has attracted a growing number of consumers, challenging the competitive position of community banks.
Accessibility and Convenience: Both community banks and credit unions have invested in digital banking, offering online and mobile access to enhance client experience. Community banks often focus on in-person service and local engagement, which builds strong client trust. Credit unions may have fewer branches but participate in shared branch networks, allowing members broader access across locations.
The Growing Challenge of Credit Unions in the Local Market
The competitive landscape between community banks and credit unions has intensified, especially as credit unions leverage their tax-exempt status to grow and offer lower rates. In Oregon, credit unions are increasingly capturing market share traditionally served by community banks. Their expansion into commercial lending and larger markets challenges community banks like Summit Bank, as the difference in tax treatment creates an uneven playing field, making it harder for community banks to match the rates and fees credit unions can offer.
From Summit Bank’s perspective, this trend raises questions about market fairness. Credit unions’ shift from member-focused cooperatives to a broader role in commercial lending blurs their original mission and increases competition in sectors that community banks have traditionally served. The tax advantage credit unions enjoy makes it challenging for community banks to compete on a level playing field.
Why Community Banks Remain Vital to Local Economies
Despite these challenges, community banks remain essential to local economies. Summit Bank’s client relationships allow us to provide financing that aligns with Oregon’s unique needs, supporting job creation, funding small businesses, and investing in local projects. Community banks reinvest an estimated $10 billion annually into their regions, fostering economic growth and strengthening community ties. Credit unions also contribute positively, but they may need more investment in commercial and community-focused projects that require a deep understanding of local needs.
A Balanced Perspective
Both community banks and credit unions serve valuable purposes, yet their growing overlap in commercial lending raises considerations for the future of financial services. At Summit Bank, we are committed to adapting to these changes while holding firm to our mission of supporting Oregon’s economy and building meaningful relationships with clients. By offering personalized service and local expertise, we aim to distinguish ourselves even as competition from credit unions intensifies.
In summary, community banks like Summit Bank provide essential value by understanding and meeting the local economy’s needs. As the financial landscape continues to evolve, Summit Bank will continue to have a huge emphasis on the importance of community banking and its positive impact on our clients and communities.