James Sept-Oct 2021 web - Flipbook - Page 33
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JAMES
SEPTEMBER/ OCTOB E R 2021
o the shock of many “experts,” community banks proved to be the leaders
in distributing valuable PPP funding to
Georgia’s small businesses in 2020. By
supplying nearly 60 percent of all Paycheck Protection Program (PPP) funding in Georgia, community banks outpaced the large/multi-regional institutions as well as tax-exempt credit unions. Fortunately for
Georgia’s small and medium sized businesses, prior years’
investment in financial technologies (Fintech) ensured
that community banks were well positioned to serve the
needs of their customers.
This investment and adaptation accelerated starting
in late 2017. The reduction of the corporate tax rate from
an onerous 35 percent to 21 percent provided community banks and small businesses the resources and ability
to re-invest for growth— and that is exactly what these
community banks did.
This was particularly beneficial for Georgia as 70
percent of the state’s community banks are C-Corp
institutions and 81 percent are smaller banks under $500
million in assets. The improved efficiencies gained by
technology, enabled by the lower tax structure also contributed to the stability of the state’s community banking industry. The total net number of community banks
has remained constant for over two years, halting the
trend of consolidation.
Technology investments are never static. They must
continually evolve to ensure consumers and businesses
have access to the most up-to-date products and capabilities. Unlike large banks and non-bank providers,
community banks are not big generators of non-interest
income. Their revenues are primarily derived from the
interest spread between deposits and loans, as compared to service fee charges. Additionally, unlike credit
unions, community banks that are C-Corp institutions
are subject to full federal and state taxation. This is
magnified by the fact that in recent years as many credit
unions have grown into multi-billion-dollar institutions-yet remain untaxed.
In order to serve the changing needs of their customers, maintain profitability and compete with tax and regulatory advantaged competition, community banks must
continue adopting new technologies which also serves to
decrease the cost of internal operations, or efficiency ratio
as it is known in banker parlance. Fortunately, this is what
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