Community banks are a source of strength, stability and resiliency

April is traditionally Community Banking month in Illinois, and this year's theme is "Moving Forward Together," a fitting moniker for community banks across the state as they share the independent spirit that is the hallmark of locally run banks.

Reading and watching the news recently has made it clear that now, more than ever, there is no better time for local businesses and consumers to do business with a community bank. It is a time to celebrate the important contributions community banks make not only to their local economies but to the nation's economy, as well.

Community bankers have earned their customers' appreciation for the common-sense approach they take to doing business with their neighbors and understanding their local community. The decision-makers at community banks are invested in your community.

A "community bank" typically refers to a financial institution under $10 billion in assets with a focus on their local communities. Even though community banks make up a small share of total assets and deposits, 13.5% and 13.9%, respectively, these institutions play an integral role in providing much-needed services to banking customers, accounting for 97% of all banks in the U.S., according to FDIC data.

While community banks still make up a vast majority of the overall bank population, their share is declining significantly. The number of community banks has dropped nearly half since 2000, from 8,315 to 4,548 community bank charters. Much of the decline can be attributed to consolidation and mergers and acquisitions.

Despite their declining market share, community banks remain crucial financial services providers and are the predominant providers of banking services in rural communities across the country. In addition, community banks are major providers of credit to commercial borrowers, including during periods of economic stress.

Community banks fund the majority of commercial real estate loans under $1 million, and they are responsible for more than three-quarters of commercial real estate loans under $100,000.

Because of the higher fixed costs associated with originating small business loans, many large banks restrain from these small loans, leaving community banks to meet the need. Additionally, community financial institutions are more likely to leverage relationship lending to help smaller businesses obtain loans that they might not be able to secure with larger institutions based solely on their financial information.

In addition to competitive pressures from larger banking organizations, community banks face growing challenges from broader economic consolidation, changing demographics, and rapidly advancing financial technologies. Technology presents an obstacle and an opportunity.

Technological advancements are expensive and can take time to implement. At the same time, they can help streamline and automate many manual processes, offer better product delivery and data analysis while creating efficiency in the back office. These advancements offer the opportunity to focus on more personalized services for bank customers.

In today's environment, digitalization is not just a nice-to-have; it's a necessity.

Itasca Bank & Trust Co., an independent locally owned community bank with locations in Itasca and Roselle, learned the value of digital offerings during the many months of uncertainty brought about by COVID-19. The bank leveraged the technology available to participate in the Paycheck Protection Program (PPP) which enabled the bank to offer loans to many small businesses, giving them the opportunity to survive instead of closing their doors.

"During the pandemic, the opportunity to help businesses was never more obvious and necessary. The crisis magnified the fact that community banks are truly there for the communities they serve," said James R. Mensching, president of Itasca Bank & Trust Co.

While community banks face a challenging road ahead, they have opportunities to grow and thrive. By implementing innovative technologies and strategies to reduce costs and manual processes, community banks can capitalize on their strength, stability, and resiliency to continue to offer the quality service their customers expect.

Itasca Bank & Trust Co., founded in 1948, is a locally owned, independent community bank with locations in Itasca and Roselle with assets of $731 million. The president is James R. Mensching. The bank directors include: Jack Mensching, Chairman, James R. Mensching, Bryan Mraz, John Sotos, Dr. Roy Scheck, Robin VanCastle, Don Sofolo, John Skoubis, Jessica Mazza and Hubert J. Cioromski.

• Ginny Wagner is Vice President/Director of Marketing at Itasca Bank & Trust Co.