Community Banking Snapshot
Community banks and credit unions (defined here as locally operated financial institutions with under $10 billion in assets) remain a cornerstone of the American financial system. They provide personalized services, support local businesses and help build economic stability in their communities.
Community Banking Heading into 2026
Consumer profiles are changing, and financial institutions must ensure they are prepared to meet a wide range of needs and expectations. Younger generations want fast, seamless and personalized digital services and aren’t afraid to switch institutions to find them. Meanwhile, competition is intensifying from all directions, and expectations around cybersecurity, AI governance and fraud prevention continue to rise. To thrive, community banks and credit unions must stay agile, protect their account holders and use technology in ways that enhance—not replace—their personal service.
Confidence in Community Banking
Despite the many challenges they face, most banking professionals (especially those from larger institutions) remain optimistic about the future of community banking. However, the percentage of respondents with a neutral or pessimistic outlook rose five points since last year.
This slight dip in optimism appears concentrated among smaller institutions under $1B in assets, which face stronger pressures from consolidation, tighter budgets and limited technology resources. Larger institutions remain almost universally confident, as they’re better positioned to pursue acquisition opportunities and invest in technology modernization.
This growing gap reinforces the imperative to prioritize operational efficiency and targeted technology investments that deliver clear, measurable impact and make the most of the resources available.
I’m optimistic about the future of community banking.
Strongly Agree
Agree
Neither Agree nor Disagree
Disagree
Technology and Efficiencies
Efficient processes and modern technologies remain essential for growth and retention. An overwhelming 93% of respondents are interested in personalizing their offerings, and 74% think their processes could be more efficient. The latter represents a 15-point decrease from last year, suggesting that institutions may be feeling early effects of recent technology investments, including AI and automation.
My institution is interested in customizing our product offerings through technology integrations.
Strongly Agree
Agree
Neither Agree nor Disagree
Disagree
My institution’s processes could be more efficient.
Strongly Agree
Agree
Neither Agree nor Disagree
Disagree
Growth and Engagement
With similar numbers to 2025, growth and digital engagement remain priorities for community financial institutions. More than eight out of 10 report attracting younger account holders, a positive sign as more of Gen Z enter the workforce.
However, while most respondents believe they’re gaining traction with Gen Z and millennials, this sentiment contrasts with industry research. The Harris Poll found in 2024 that 79% of Gen Z (and 69% of Millennials) still consider a large national bank their primary financial institution.1
Simultaneously, though, the same poll pointed to a potential advantage for community financial institutions: Gen Z and Millennials reported the least satisfaction with their primary institution (mostly national banks) and the most openness to switching to a community bank or credit union.
Winning these accounts requires frictionless digital experiences, clearer market differentiation and timely, personalized touchpoints that reinforce engagement early and often throughout the account lifecycle.
My institution is growing its existing customer base.
Strongly Agree
Agree
Neither Agree nor Disagree
Disagree
My institution’s customers are engaged on digital channels.
Strongly Agree
Agree
Neither Agree nor Disagree
Disagree
My institution is focused on increasing retail deposits.
Strongly Agree
Agree
Neither Agree nor Disagree
Disagree
My institution is attracting younger generations of account holders (e.g., Gen Z).
Strongly Agree
Agree
Neither Agree nor Disagree
Disagree
The Future of Branches
91% of respondents believe the branch will remain relevant for at least the next 10 years, up from 86% last year. This rising confidence (despite the popularity of mobile banking) points to a key advantage for community banks and credit unions. While national banks maintain large branch networks, local institutions often stand out in how branches operate: faster access to decision-makers, more personalized support and a relationship-driven approach that is difficult for larger institutions to replicate. Local branches remain a place of reassurance for account holders, offering the opportunity to resolve complex issues in person. Even tech-savvy Millennials and Gen Zers still value having the option to meet face-to-face when needed.
The branch experience is especially important in commercial banking. Commercial clients often rely on in-person conversations to navigate more complex or time-sensitive needs that benefit from direct expertise and faster decision-making. As community financial institutions pursue larger commercial portfolios, a high-quality and accessible branch relationship will become an even greater competitive advantage.
Our survey results suggest that more financial institution leaders are recognizing the need to balance branch and digital experiences. During the pandemic, this balance shifted heavily toward digital; today, it is returning toward the mean. Community financial institutions should intentionally manage the balance between branch and digital experiences, designing strategies that complement one another: seamless digital for routine needs and high-value, personal interactions at the branch for moments where expertise and trust matter most. Doing so requires clear performance metrics and accountability across both channels to ensure neither experience lags behind account holder expectations.
The branch will remain relevant for the next 10 years.
Strongly Agree
Agree
Neither Agree nor Disagree
Disagree