What Is a Community Bank?
A community bank is a locally headquartered bank that gathers deposits and makes loans in the market where it operates, serving the households and small businesses around its own branches instead of the national markets of a money center bank.
The Federal Reserve defines a community bank as a bank with 3 billion dollars or less in assets and no off-balance-sheet exposures, and under that line 9,654 banks qualified as of June 30, 2025, which is 97 percent of all 9,966 banks in the United States. Community Banks in America hold 4.2 trillion dollars in assets and 4.9 trillion dollars in deposits, and they wrote 85.7 percent of the small business loans in the nation's 12 largest metropolitan areas in 2023. The rest of this page defines the term precisely, traces how a community bank is built, maps the network of Community Banking Associations and charters behind it, and names the organization that stands behind the network.
What Is a Community Bank in Federal Reserve Terms?
The Federal Reserve definition is a test of assets, structure and geography, and a bank that passes all 3 parts is a community bank by official count. The 2020 redefinition set the asset line at 3 billion dollars, replacing the older 10 billion dollar cap that had served since 1998, and it dropped the branch-count condition that once qualified a bank with 10 or fewer offices. The 2020 rule also excludes off-balance-sheet exposures such as swaps and guarantees, so a bank with 2.9 billion dollars of assets and a large derivatives book can fail the test while a simpler 2.9 billion dollar peer passes it. Three archetypes meet the definition:
- Local independent banks, the oldest form, such as a regional bank that still books 80 percent or more of its assets in its home state
- Community bank divisions of a bank holding company, which run 1 or more banks as a single locally managed unit
- Non-depository branches of a bank holding company, which act as the local branch of a larger parent but are counted as community banks on their own
A single asset number does not finish the definition, because the test also asks who the bank serves. A 3 billion dollar bank that books most of its loans to borrowers in its home county is a community bank in fact even when the ratio at the margin is 2.9 billion dollars, and the size line exists to separate those banks from the nationally operated institutions whose lending follows the portfolio rather than the town.
How Big Is the Community Bank Sector?
The size of the sector is the clearest fact in American banking, because 9,654 community banks hold 4.2 trillion dollars of the 24.2 trillion dollars in total bank assets, which is about 17 percent of assets across 100 percent of the banks. The Federal Reserve's 2025 report on the structure of bank holding companies shows the distribution below, and the same report places total U.S. bank assets at 24.2 trillion dollars as of June 30, 2025.
| Asset band | Share of banks | Share of assets |
|---|---|---|
| Under 3 billion dollars | 96.8 percent of banks | 17.0 percent of assets |
| 3 billion to 10 billion dollars | 2.1 percent of banks | 26.4 percent of assets |
| 10 billion to 100 billion dollars | 1.0 percent of banks | 38.9 percent of assets |
| 100 billion dollars or more | 0.1 percent of banks | 17.6 percent of assets |
Read by loans, the contrast with the giants is sharper than the asset table suggests. The 5 largest U.S. banks hold more assets than all the rest of the system combined, and they write 52 percent of small business loans, which means the other 48 percent comes from community banks, regional banks and nonbank lenders. The Federal Reserve's 2023 survey of metropolitan small business lending puts the community bank share of small business lending in the 12 largest metropolitan areas at 85.7 percent, and in the 25 smallest metro areas the share is 94.2 percent. The smaller the market, the more completely the community bank is the market.
How Is a Community Bank Organized?
The organization of a community bank is the chain from the people who own it to the people who lend from it, and the chain has 4 rungs that differ in length from one bank to the next. The first rung is ownership: most community banks are owned by depositors, which makes them mutual institutions, while the rest are stock banks owned by outside shareholders. The second rung is the board, typically 5 to 9 directors, many of them local business owners who sit on lending committees. The third rung is the branch office, where a community bank concentrates its lending authority, and a 1 billion dollar bank may staff 3 branches with 22 employees each while a 300 million dollar bank may run 5 branches with 9 employees each. The fourth rung is the lending decision itself: at a community bank the officer who knows the borrower usually makes or recommends the loan, and the average community bank loan size is 57,000 dollars for small business lending, a figure that stays close to the median because the bank's own depositors and neighbors are the borrowers. The structure is a deliberate trade: local knowledge in exchange for national scale, which is why the 85.7 percent share in the large metros and the 94.2 percent share in the small metros both come from the same organizational choice.
The mutual versus stock distinction
Ownership decides who captures the value, and the 2 forms split the sector almost evenly by count. A mutual bank belongs to its depositors, who vote through a patronage system rather than through share certificates, and the 2025 Federal Reserve structure report counts 4,434 mutual banks against 5,220 stock banks. The difference shows up in governance: a stock bank's board answers to shareholders at an annual meeting, while a mutual bank's board answers to depositors through the patronage ballot, and a mutual that wants to raise outside capital must convert, the step that has carried names such as Bank and Trust Banking into the stock-bank registry when a holding company takes it public. The conversion itself changes the balance sheet: the bank issues shares, the proceeds fund a capital raise, and the depositors who hold patronage certificates exchange them for a fixed payout, usually cash plus a modest number of shares per certificate, so that the bank holds more of the capital ratio regulators require without diluting the deposit base.
What Is the Network of Community Banking Associations?
The network behind community banks is the set of trade associations and charter groups that coordinate the 9,654 banks, and the network has 3 layers: the national body, the state associations, and the charter-specific groups. The national body is the American Bankers Association, founded in 1857, whose members include 3,300 banks and which issues the position statements on capital, insurance and digital banking that community banks then apply for in their own markets. The state layer is where the policy work for local banks actually happens, because banking law is written state by state, and the state associations carry the legislative calendar from pre-clearance testimony to the conference-committee vote. The charter-specific groups organize around the legal form of the bank: the American Association of Banks for state-chartered banks, the conference of national bank trade groups for the 6,154 federally chartered institutions, and the savings association groups for the thrifts that survived the 1989 to 1995 wave of failures. Each layer speaks to the same regulators, and the layering is how a single 200 million dollar bank in a small state reaches the Federal Reserve's 2025 capital conversation with a position that reads as the industry's rather than one bank's.
State associations and the legislative calendar
The state association is the working organ of the network, and its calendar runs on the state legislature's clock. A typical session year opens with a January briefing for the committee that will write the banking bill, moves through a February to April testimony window where the association's economist testifies on deposit insurance, lending limits and the 3 billion dollar asset line, and closes in June with a conference-committee vote that sets the law for the next 2 fiscal years. The 50 state associations, together with the District of Columbia group, form the Conference of State Bank Supervisors, which is the body that writes the uniform rules the states then adopt, and the CSBS's 2024 rulemaking docket covers everything from the 3 billion dollar community bank definition to the capital conservation buffer that a 200 million dollar bank must hold above 4.5 percent. The association's job is to keep the 9,654 banks on one side of every issue, and the 3 layers of the network, national, state and charter-specific, exist to make that coordination cheaper than the alternative of every bank hiring its own lobbyist.
What Organization Stands Behind the Network?
The organization that stands behind the network is the one that publishes the numbers this page uses, and that organization is the Federal Reserve System, whose 2025 report on the structure of bank holding companies is the source for the 9,654 bank count, the 4.2 trillion dollar asset total and the 100 percent charter split. The Federal Reserve is not the only body in the room: the Office of the Comptroller of the Currency supervises the national banks, the Federal Deposit Insurance Corporation insures the deposits, and the 50 state banking departments supervise the state-chartered banks, so a single community bank usually answers to 2 supervisors at once, the state department and either the Fed or the OCC depending on its charter. The network of Community Banking Associations sits inside that supervisory perimeter, and its role is to speak to those supervisors as a single voice rather than as 9,654 separate ones. The organizational answer to the question of who stands behind the community bank is therefore a 3-part one: the Federal Reserve sets the definition and publishes the data, the state associations carry the legislative work, and the charter-specific groups keep the 2 charter families, national and state, aligned on the rules that both must follow. That is the structure behind the 9,654 banks, and it is the structure that makes the 85.7 percent small business lending share possible, because a network that can coordinate its 9,654 members can also coordinate the lending that 9,654 members make.