The pandemic has arguably inflicted the biggest economic damage on small businesses. That's why it's surprising to see small, local banks performing so well in the second half of 2020. Will the strength continue?
In Q3, profits surged 10%, total loans rose 13.4% and deposits surged 16.7%, according to the Federal Deposit Insurance Corp. Compare this with 4.9% loan growth for the entire banking sector.
Much of the strength at small banks can be attributed to fiscal stimulus, namely in the form of PPP loans. PPP brought small banks new customers, with small banks handling some 28% of all PPP loans. Since lenders earn a fee of 1% to 5% on each loan, small banks managed to continue profitability even as the economy struggles to maintain the recovery.
For Tickeron's A.I.-driven insights into regional banks, and some trading ideas, continue reading below.