FDIC Quarterly Report: The Importance of Community Banks in Paycheck Protection Program Lending

Community banks play an important role providing financial services to local customers and small businesses.1 Despite their relatively small size and share of banking industry assets, community banks have consistently demonstrated an ability to serve their customers. Even before the COVID-19 pandemic, community banks held an outsized share of small business loans.2 At year-end 2019, community banks held about 25 percent of small business loans, well above their share of 15 percent of total banking industry loans. Community bank participation in the U.S. Small Business Administration’s Paycheck Protection Program (PPP) was also proportionately larger than their size in the banking industry. Other published analyses have discussed PPP activity in aggregate and by institution size. This article focuses on contributions of community banks to the PPP and explores how factors such as community bank location, specialty, and size affected participation.

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