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Top Banking Challenges: Finding Growth in 2021 and Beyond

Mary Ellen Biery
March 24, 2021
Read Time: 0 min

Increasing Loans and Earnings are Top Priorities

Financial institution executives are taking steps to address these issues. Here's what they're doing.


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Independent Banker Survey

Growing loans, earnings are banks' top challenges in 2021.

The top banking challenges in 2021 are growing loans and earnings, according to Independent Banker’s recent 2021 Community Bank CEO Outlook survey. More than half of respondents (53%) named increasing earnings as among their top three challenges, and 48% cited increasing loans.

Those rankings, along with the fact that “growing deposits” fell to nearly the bottom of challenges from the survey’s top spot in 2020, tell the story of last year in a nutshell. While financial institutions are now largely flush with pandemic-related deposits, their path to increasing loans and profitability is uncertain given the economy.

Nevertheless, many financial institution executives have taken – and are taking – steps that will help address their top concerns related to lending and profitability. These steps include technology upgrades, as well as efforts to eliminate inefficiencies, expand customer or member relationships, and develop non-interest income to ensure success and survival.

Pandemic-Induced Transformations

Technology sets up future lending success.

For example, many banks and credit unions that participated in the Paycheck Protection Program (PPP) during a time requiring remote work implemented digital technology for originating PPP loans and processing forgiveness applications under extremely tight deadlines. Nearly universally, community financial institution PPP lenders have reported winning new business customers as a result of their help during the PPP. Now, they are focused on expanding those relationships.

“There have just been dozens and dozens of stories of us landing relationships, and in multiple cases, it’s relationships that are several million dollars,” Brian Plum, CEO of Blue Ridge Bank, told an audience at the ThinkBIG conference in September. “For us, these are sizable, meaningful relationships.”

Financial institutions also spent money on technology to enable accepting smaller-dollar business loans profitably or to open retail or small business deposit accounts online. Indeed, Bank Technology’s 2020 Technology Survey found 65% of respondents implemented or upgraded technology to serve customers’ needs or enable remote work as a result of the COVID-19 pandemic. A similar percentage reported having increased their technology budgets.

Among those that boosted budgets and implemented technology, 35% focused on digital loan application technology, and 32% boosted technology for digital deposit account openings.


Positive signs in recent lending data

As the PPP frenzy winds down, some of those same business borrowers will undoubtedly request additional funds from their new lenders to bridge the uncertainty. Meanwhile, businesses that flourished in the pandemic may look to expand operations. Cleaning and delivery services, liquor and wine stores, fitness equipment companies, gardening suppliers, and used car sellers are among businesses that have thrived during the pandemic and may be targets for new loans.

In fact, the decline in commercial and industrial loans moderated during the fourth quarter and ticked higher in February, according to Federal Reserve data. Some bridge lenders are already seeing renewed interest in commercial real estate, one of the hardest hit lending areas last year. Mark Jarrell, head of Greystone’s Portfolio Lending Group, said recently in a company blog post that he expects a normal pace of CRE investment activity in 2021, as well as a boost from activity that has shifted from 2020 into 2021.

“Some of this optimism comes from the perception that there’s a light at the end of the tunnel,” Jarrell said. “We’re not as in the dark about what’s happening, such as what it will cost to operate senior housing post-COVID-19. Things have settled down in the multifamily space, too, especially in the secondary and tertiary markets where garden apartments, in particular, have survived well.“

Other loan programs provided by the Small Business Administration (SBA) could also generate some activity for lenders that have not historically pursued SBA loans.

top banking challenges

“This is a great time with low interest rates for small businesses that are renting to buy their building,” said Tom Bennett Jr., Chairman and Co-CEO of First Oklahoma Bank,  in a recent interview with “Or if they’ve thought about expanding because they can get long-term SBA loans at fixed rates.”

In addition, businesses with current SBA loans may find help from the SBA programs to structure their balance sheets and debt for growth as the economy recovers.

Capitalize on the momentum you gained during 2020.

Learn more

Optimize Technology

Capture efficiencies, opportunities with tech.

Lenders with streamlined, digital applications and underwriting will have the upper hand on those opportunities to increase lending. Financial institutions can also leverage technology to address the challenge of growing profits – especially if they optimize tech investments they’ve already made.

One challenge with adopting technology during the pandemic is that the staff have been working almost in a fire-drill mode for more than a year. As a result, some old, inefficient processes may remain despite technology adoption simply because no one had time to review them and propose changes, or because there was insufficient time to train staff on all the technology’s capabilities.

Now is a good time to examine these issues and adjust to make the most of tech investments. Take steps to course-correct on any technology purchases that aren’t delivering the expected efficiencies or opportunities for scaled growth. 

Some ideas include:

  • Reach out to the technology provider for suggestions on features unused so far
  • Ask about bolt-on technologies that can help further transform time-consuming processes and improve customer or member experiences
  • Examine user adoption and if necessary, arrange for additional training for staff

Digital + relationship banking = better NIM

Re-evaluate how existing resources can blend digital innovations with the community financial institution’s hallmark relationship-banking practices. Some of these resources help develop banking relationships more fully and keep down expenses that can pinch net interest margin (NIM).

A customer relationship manager (CRM), for example, can organize and manage customer/member/prospect relationships. A CRM that connects with the lending platform and other systems eliminates time-consuming tasks that aggravate borrowers and underutilize bankers’ talents, such as inputting basic account data when filling out a loan or new account application. It also enables marketing targeted at a specific industry or type of customer or member, such as PPP borrowers who might need equipment loans. Offering cross-sell and up-selling options at the right time will yield optimal success.

Using technology to expand relationships can be as simple as making use of some of the learnings during the pandemic even after the crisis ends. Centric Bank President and CEO Patricia Husic said her financial institution has practiced flexibility in its efforts to continue conducting business safely. Centric has replaced some out-of-office business lunches by sending a meal via DoorDash and then holding the meeting “over lunch” via Zoom, Husic said during the Fintech Talents North America conference. Using the DoorDash-Zoom model, lenders may find busy business owners more willing to meet to discuss needs if offered this convenient option rather than requiring a face-to-face meeting.

'Customer for life'

Use pricing models to retain the best customers/members

Various types of technology can make banking relationships more profitable. Pricing models for loans and deposits can combat margin pressure and help retain the best customers or members. One example: a financial institution can leverage the low interest rate environment to offer some of their best clients the opportunity to refinance. Abrigo Senior Advisor Rob Newberry has noted that by adding product features like 6 months interest only and adding that interest back into the principal balance, lenders can provide the best customers or members with cash flow relief and more security of a lower interest rate. Clients “have something longer term they’re locked in that they’re happy with, and you have a customer for life,” Newberry says.

Deposit pricing models can also help institutions manage deposit accounts more profitably or use benefits to drive more loan growth by, for example, closing a loan deal with an offer of 25 basis points on a deposit account.  

The path to earnings growth in 2021 won’t look like it has in recent years for most financial institutions. But by leveraging recent technology investments and ensuring deposits are put to use wisely, banks and credit unions can spur growth and increase profitability despite the uncertain economic environment.

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About the Author

Mary Ellen Biery

Senior Strategist & Content Manager
Mary Ellen Biery is Senior Strategist & Content Manager at Abrigo, where she works with advisors and other experts to develop whitepapers, original research, and other resources that help financial institutions drive growth and manage risk. A former equities reporter for Dow Jones Newswires whose work has been published in

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About Abrigo

Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

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