Population shifts resulting from the coronavirus crisis starting in 2020 affected community bank deposits and loans, even as rural areas gained population and metropolitan areas saw the numbers of people there decline, the federal insurer of bank deposits said Wednesday.
The Federal Deposit Insurance Corp. (FDIC), in its publication FDIC Quarterly, said in the wake of the pandemic, populations in many metropolitan counties plateaued or shrank. Meanwhile, in many rural counties, the FDIC report stated, populations stabilized or expanded, “patterns at odds with decades-long trends of rural depopulation and urban concentration.”
Key points contained in the report, the FDIC said, included:
- In metropolitan counties, deposits at community banks grew with population, while in more rural counties, deposits grew at a significantly lower rate than population and lag population growth by about a year.
- Community banks in metropolitan counties focused on commercial real estate loans. Community banks in micropolitan counties focused on residential loans, while community banks in rural counties focused on agricultural loans.
- Across all county types, population growth correlated with higher loan portfolio shares for commercial real estate and lower shares for residential loans.
- In rural and micropolitan counties, population growth correlated with a relative decline in agricultural loans.
- In micropolitan and metropolitan counties, population growth correlated with a relative decline in commercial and industrial loans.
“Community banks in rural, micropolitan, and metropolitan counties may have prepared for deposits levels and specialized in loan portfolios that best serve their local communities based on pre-pandemic trends,” the FDIC publication reported. “However, if changes in population growth patterns persist, community banks may have to adjust their business models. Population growth has different implications for counties along the rural-urban spectrum.”
The points were included in an article in the Quarterly, “The Effects of Population Change on Community Bank Deposits and Loans.”
Also in the Quarterly, the FDIC reported that, for the first time in 30 years, annual deposits at banks overall declined and bank office closures decelerated in the year ending June 30, 2023.
The FDIC said deposit declines were greatest at large banks, while community banks reported deposit growth. The office closure rate improved from a year ago, and community banks opened offices in metropolitan, micropolitan, and rural counties,
Key points, the agency said, included:
- Domestic deposits declined 4.8%.
- Deposit declines were greatest at large banks.
- Deposits increased in micropolitan counties.
- Community banks reported deposit growth over the year.
- The largest banks reported the largest decline in offices.
- Community banks opened offices in metro, micro, and rural counties.
The Effects of Population Change on Community Bank Deposits and Loans
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