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Banking in 2021: Solving the Challenge of Excess Liquidity

Financial Institutions: Streamline Operations, Finance

Embrace an agile mindset, protect your margins and encourage loan growth.

Community banks have been on a liquidity roller coaster for the past few years. Not so long ago, we were talking about a lack of liquidity. Now, the challenge is having too much. 

During the pandemic, community banks funded nearly $150 billion in PPP loans, the proceeds of which many borrowers simply turned around and deposited into their accounts. Now that the loans have been (or are being) forgiven, a large portion of these funds remain on deposit, and community banks face several challenges:

  • Finding ways for that money to work for banks during the pandemic has been difficult.
  • Traditional loan demand has not returned in many markets.
  • Excess liquidity and low loan demand leads to low loans-to-deposits ratios.
  • Yields are still low on investment options.
  • NIMs are at historic lows.

All of this adds up to a need for banks to adopt an agile performance banking culture to minimize that excess liquidity and encourage loan growth. 

In a new white paper, Deluxe's financial performance strategists share their top three solutions and strategies for utilizing extra funds and combatting NIM compression. Download your complimentary copy of Banking in 2021: Solving the Challenge of Excess Liquidity today.

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