Pub. 8 2020 Issue 2

16 The Community Banker www.mibonline.org Protection Program, issuing nearly two-thirds of PPP funds, which were critical for mitigating further increases in unemployment and supplying households with much-needed income to whether declines in liquidity due to decreased business activity. As Figure 4 shows, states with a higher share of community banks received more PPP funding during the early stages of the current re- cession, with the top 10 states able to cover 20% more of their payrolls than the bottom 10 states. In addition, by performing their most basic functions, from accepting deposits to providing loans, community banks have been vital pillars of support to Main Street by facilitating a healthy circulation of capital to keep local economies in operation while social distancing measures have gone into effect. As shown in Figure 5, community banks posted major gains in deposits and loans during the first three months of this recession. Upon closer examination of the data, it is clear that this current reces- sion poses both significant economic threats, and concurrent opportuni- ties, fromwhich to make the most of an inevitable economic phenome- non and to rebound on stronger footing and shoulder another decade’s worth of expansion. In particular, the dynamics of this recession present major opportunities for community banks to facilitate a speedy recovery and mitigate its potential severity while serving as an important resource for localities at different stages of the healing process. While the current economic landscape may appear bleak at first sight, the data presents a strong case for cautious optimism as we press forward in these uncertain times in hopes of a brighter tomorrow. Noah Yosif is ICBA assistant vice president of economic policy and research. Figure 4: 1st Quarter Payroll Coverage via PPP Loans by State (source: United States Small Business Administration / Federal Deposit Insurance Corporation) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% % of 1st Quarter Payrolls Covered Ratio States with a higher share of community banks were able to cover a larger percentage of first quarter payrolls during the first round of PPP funding. Community Bank Prevalence Community Banks' Small Business Lending Market Share Linear (Community Bank Prevalence) Linear (Community Banks' Small Business Lending Market Share) Figure 5: Loan and Deposit Balances at Community Banks (source: United States Federal Deposit Insurance Corporation) 0 0.02 0.04 0.06 0.08 0.1 0.12 0.14 -0.2 0 0.2 0.4 0.6 0.8 1 1.2 1.4 Annual Growth Rate Quarterly Change (billions) Increased liquidity demands drove loans and deposits at community banks to record highs during the first quarter of the Coronavirus Recession. Quarterly Change in Loans Quarterly Change in Deposits Annual Loan Growth Rate Annual Deposit Growth Rate Trusted in Montana for over 60 years CONTINUED FROM PAGE 15