As an auditor, the final months of the year are generally filled with a lot of planning work as we prepare for the upcoming audit season. Part of that planning time involves looking back to the prior-year audit files to refresh our understanding and develop an appropriate audit plan for the coming year.
It was interesting looking back through the 2019 audit files to see the strategic and operating plans that financial institutions had developed for 2020. Many institutions had made thoughtful analyses, but none of the plans discussed the projected challenges of managing through a pandemic that included branch closures, assisting loan customers through unprecedented financial challenges, and allocating resources for booking PPP loans and dealing with ever changing rules and interpretations on forgiveness. Undoubtedly, 2020 contained an unprecedented level of challenges.
Although 2020 didn’t go as expected or as hoped, I’ve been extremely impressed with the way financial institutions responded to the challenges as we continue our work into 2021. Part of that successful response was financial institutions not allowing the new challenges to distract from emerging opportunities to assist their customers. As a result, many institutions were able to benefit from low interest rates and generate substantial mortgage banking income.
In addition, institutions patiently endured the frustrations of dealing with the SBA on PPP loans, to generate substantial fee volume. Hopefully those fees, for the loans that remained unforgiven during 2020, are being deferred over the life of the loan, consistent with accounting standards, and will continue to boost the bottom line as 2021 continues as well.
Beyond the numbers, however, many financial institutions responded successfully by providing outstanding service to customers. Institutions have made significant investments to physical locations and online resources to ensure that customers can bank safely, without sacrificing convenience. In addition, I have seen numerous examples of already overworked loan departments that have gone out of their way to develop sensible relief plans to assist struggling loan customers.
Congratulations to the financial institutions industry for finding ways to thrive during a year of unexpected challenges. As we continue to press onward in 2021, remember to stay on top of new information regarding PPP loans and how changes may impact your financial institution.