Pub. 2 2021 Issue 3 22 In Touch T he top banking challenges in 2021 are growing loans and earnings, according to Independent Banker’s recent 2021 Community Bank CEO Outlook survey. More than half of respondents (53%) named increasing earnings as among their top three challenges, and 48% cited increasing loans. Those rankings, along with the fact that “growing deposits” fell to nearly the bottom of challenges from the survey’s top spot in 2020, tell the story of last year in a nutshell. While financial institutions are now largely flush with pandemic-related deposits, their path to increasing loans and profitability is uncertain, given the economy. Nevertheless, many financial institution executives have taken — and are taking — steps that will help address their top concerns related to lending and profitability. These steps include technology upgrades, as well as efforts to eliminate inefficiencies, expand customer or member relationships, and develop non-interest income to ensure success and survival. Technology sets up future lending success For example, many banks and credit unions that participated in the Paycheck Protection Program (PPP) during a time requiring remote work implemented digital technology for originating PPP loans and processing forgiveness applications under extremely tight deadlines. Nearly universally, community financial institution PPP lenders have reported winning new business customers as a result of their help during the PPP. Now, they are focused on expanding those relationships. “There have just been dozens and dozens of stories of us landing relationships, and in multiple cases, it’s relationships that are several million dollars,” Brian Plum, CEO of Blue Ridge Bank, told an audience at the ThinkBIG conference in September. “For us, these are sizable, meaningful relationships.” Financial institutions also spent money on technology to enable accepting smaller-dollar business loans profitably or to open retail or small business deposit accounts online. Indeed, Bank Technology’s 2020 Technology Survey found 65% of respondents implemented or upgraded technology to serve customers’ needs or enable remote work as a result of the COVID-19 pandemic. A similar percentage reported having increased their technology budgets. Among those that boosted budgets and implemented technology, 35% focused on digital loan application technology, and 32% boosted technology for digital deposit account openings. Positive signs in recent lending data As the PPP frenzy winds down, some of those same business borrowers will undoubtedly request additional funds from their new lenders to bridge the uncertainty. Meanwhile, businesses that flourished in the pandemic may look to expand operations. Cleaning and delivery services, liquor and wine stores, fitness equipment companies, gardening suppliers, and used car sellers are among businesses that have thrived during the pandemic and may be targeted for new loans. In fact, the decline in commercial and industrial loans moderated during the fourth quarter and ticked higher in February, according to Federal Reserve data. Some bridge lenders are already seeing renewed interest in commercial real estate, one of the hardest hit lending areas last year. Mark Jarrell, head of Greystone’s Portfolio Lending Group, said recently in a company blog post that he expects a normal pace of CRE investment activity in 2021, as well as a boost from activity that has shifted from 2020 into 2021. “Some of this optimism comes from the perception that there’s a light at the end of the tunnel,” Jarrell said. “We’re not as in the dark about what’s happening, such as what it will cost to operate senior housing post-COVID-19. Things have Top Banking Challenges: Finding Growth in 2021 and Beyond BY MARY ELLEN BIERY, ABRIGO A s s o c i a t e M e m b e r