Banking Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

When considering the characteristics of community banks, it's important to note that they are generally known for their localized focus and operations. They operate primarily within a limited geographic area, often serving specific communities or regions. This localized operation allows them to build strong relationships with their customers and respond to the needs of the local economy.

While community banks do tend to have extensive knowledge about their specific region and may involve themselves in community development, the statement that they "typically have extensive operations in specific regions of the country" can lead to confusion regarding their scale and scope. Community banks are not large, national institutions but rather are smaller, focusing narrowly on their immediate areas, which is reflected in the other options that correctly outline their operations, including their focus on local lending and funding primarily through deposits.

In essence, the assertion that they operate in extensive regions suggests a broader scope of operations typically associated with larger banks, which is inconsistent with the actual community bank model.