The different types of U.S. banks
There are four major categories of commercial depository institutions (banks) that operate in the United States:
National bank
A national bank designation is technically based on the type of charter a bank has. However, the term is typically defined as being a bank that has a presence throughout most (but not necessarily all) of the country. Some national banks have several trillion dollars in assets. Chase, Bank of America, and Wells Fargo are some well-known examples of national banks.
Regional bank
A bank that operates in one or more regions of a country but doesn't have a nationwide presence. Regional banks typically have a full range of banking products for consumers and businesses. Some offer investment banking services as well. Regional banks are typically regarded as those with between $10 billion and $100 billion in total assets.
A community bank is usually locally owned and operated. While there is no formal definition, community banks typically have less than $10 billion in total assets. 94% of all commercial banks in the United States fall into this category.
Credit union
A credit union is a depository institution that is very similar to other types of commercial banks. The big difference is that credit unions are nonprofit corporations owned by their members. Credit unions are typically thought of as being relatively small in size, but there are larger-scale credit unions as well.
Advantages and disadvantages of using a regional bank
The decision of which bank to use goes beyond the size of the institution -- it's important to find a bank that best meets your needs.
However, there are some general advantages and drawbacks to using a regional bank as your primary financial institution that you should be aware of.
Advantages
Regional banks have broader branch and ATM networks compared with their community bank counterparts. They also tend to have more resources to invest in things like technology (including mobile apps for bank members), and often offer more product variety.
On the other hand, regional banks tend to be more locally oriented than their large-scale national bank counterparts. They tend to take more of an interest in charitable causes in a specific region, and often have proprietary lending programs designed to appeal to customers in their specific region.
Another common advantage is cost. Regional banks often charge lower fees on products like checking accounts and loan originations in order to entice customers away from the big banks, and may also offer higher interest rates on savings accounts and CDs.
Disadvantages
While regional banks often have hundreds of branch locations and ATM machines, they might not be the most convenient if you travel regularly. For example, if you're a customer of Northeast-based M&T Bank and regularly travel to the West Coast, a national bank might be more convenient for you. The same can be said if you might be moving within the next few years.
Regional banks typically offer more products and services than community banks. However, they generally don't have the product depth that national banks do. For example, most of the big banks offer investment services and many even have their own brokerage platforms.
For example, Bank of America operates the Merrill Edge investment platform. You’re less likely to find services like this being offered by a regional bank.