In a press conference in November 2019, FDIC Chair Jelena McWilliams reported that community banks had another positive quarter in the third quarter. Net income rose and the annual rate of loan growth at banks up to $10 billion in assets outpaced the overall industry.
Despite that, in a podcast in January 2020, McWilliams said that “generally the viability of the community banking model is a huge issue for them.” She mentioned such challenges as rural depopulation, succession planning, and lack of scale to deal with cybersecurity as among the reasons. Looking ahead ten years, the FDIC chair saw two scenarios for community banks:
1. What she hopes for: Community banks have adopted and developed niche technology that works for their business model, putting them much closer to what the regionals and large banks can do. However, they are much more integrated with their communities than the larger institutions.
2. What she fears: Community banks didn’t make the investment in technology. The gap between the community banks and larger banks and nonbanks widens to become an “unbridgeable gorge.”
What do other industry leaders think about the future of community financial institutions?