Community banks that invested more in technology before the pandemic in general made more loans and took in more deposits during the health crisis than community banks that invested less in modernization, a new report shows.

The report from the Federal Deposit Insurance Corp. (FDIC) said community banks differed in their technology adoption and spending in the years leading up to the pandemic.

And when the pandemic forced business closures in March 2020 and more community banks turned to technology to provide financial services, the ones that had made earlier investments fared better, the report said.

The report’s findings came as no surprise to Cynthia Merkle, president and CEO of Union Savings Bank, which has a team dedicated to vetting new technology products and services.

“We have invested progressively in technology over the last few years, before the thought of a pandemic ever arose, and taken a disciplined approach to new products and services for our customers,” Merkle said.

In fact, one week after the pandemic shut things down, Union Savings introduced a tap-to-pay feature on its debit cards.

“It had been in development for a while,” Merkle said.

The FDIC report highlighted the importance of technology investments for community banks during the pandemic. Among its findings are that:

• Community banks that invested more in technology generally reported faster loan and deposit growth in 2020 than banks with less technology investment.

• Differences in loan and deposit growth between community banks with greater and less technology investment grew in 2020 relative to differences before the pandemic.

• Faster loan growth for community banks with greater technology investment largely stemmed from participation in the Paycheck Protection Program.

• Community banks with greater technology investment, on average, originated a greater share of PPP loans regardless of loan size, origination date, or borrower distance from the nearest bank branch.

• Larger increases in deposit growth for community banks that invested more in technology were due to increases in deposit balances of existing customers rather than from new depositors.

Merkle said Union Savings’ investment in technology to help its customers enabled the bank to handle $130 million of PPP loans in 2020 and another $70 million in 2021. Many small businesses accessed these loans through the bank’s online loan application, she said.

Like many banks, Union Savings saw more customers turn to online banking during the pandemic.

“From the end of December 2019 through August 2021, we saw a 10% increase in mobile bank transactions,” Merkle said. “People are using the tools for the first time and using them more often.”

And Merkle doesn’t think the trend will end. The bank saw a 4% decline in branch transactions between December 2019 and August 2021, but that’s not because it lost customers.

“We are convinced the decrease is customers who used to go to a branch or drive-through but started using technology,” she said. “As time went on, that part of our customer base became more comfortable with mobile and online banking.”