Community banks that invested more in technology before the onset of the coronavirus crisis generally made more loans and took in more deposits during the pandemic than did community banks that invested less in technology, according to details of new report released Friday by the federal insurer of bank deposits.
The report – “The Importance of Technology Investments for Community Bank Lending and Deposit Taking During the Pandemic” – published by the Federal Deposit Insurance Corp. (FDIC) in its FDIC Quarterly, asserts that the COVID-19 pandemic became a “crash course” for the community banks in the use of technology in their operations.
Other key findings of the report, the FDIC said, include:
- Faster loan growth for community banks with greater technology investment largely stemmed from participation in the Small Business Administration’s Paycheck Protection Program (PPP), developed to help businesses continue to pay their workers during the height of the financial impact of the pandemic.
- Community banks with greater technology investment, on average, originated a greater share of PPP loans regardless of loan size, origination date, or borrower distance from the nearest bank branch.
- Differences in loan and deposit growth between community banks with greater and less technology investment grew in 2020 relative to differences before the pandemic.
- Larger increases in deposit growth for community banks that invested more in technology were due to increases in deposit balances of existing customers rather than from new depositors.