New Reports Show That Pandemic Population Changes Affected Community Bank Deposits and Loans, and That Deposits Declined and Office Closures Decelerated in 2023
In the years immediately following the onset of the 2020 pandemic, populations in many metropolitan counties plateaued or shrank, while in many rural counties populations stabilized or expanded, patterns at odds with decades-long trends of rural depopulation and urban concentration. 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. 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, according to a new FDIC report, “The Effects of Population Change on Community Bank Deposits and Loans,” published in the FDIC Quarterly.
The FDIC found that:
- In metropolitan counties, deposits at community banks grew in lockstep 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.
Deposits declined and bank office closures decelerated in the year ending June 30, 2023, marking the first annual deposit decline in nearly 30 years. 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, according to the FDIC report, “2023 Summary of Deposits Highlights,” published in the FDIC Quarterly.
The FDIC found that in the year ending June 30, 2023:
- Domestic deposits declined 4.8 percent.
- 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.
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