, we saw more moderate asset growth for community banking organizations in the district — approximately 7. 5 percent — which is in line with national peer group averages. aggregate loan growth in 2017 was 10. 5 percent for the year, which is also comparable to the national peer group averages. over this period, we observed a small shift from commercial loan growth toward retail loan growth, specifically in the areas of one - to - four family homes and indirect automobile loans. with respect to funding in 2017, we observed strong growth in core deposits and less reliance on non - core funding sources — a positive trend from a safety and soundness perspective. in the competitive environment of the second district, we ’ ve observed community banks seeking revenue from more niche businesses such as wealth management and indirect automobile lending. we ’ ve also observed community banks participating with other banks on real estate lending, in part to better manage real estate concentrations. community banks are also seeking to differentiate themselves from their larger competitors by marketing their more individualized customer service. in regard to liquidity, a number of community bankers have noted the influx in public deposits and the challenges associated with putting these deposits to productive use. finally, although there has been a material improvement in asset quality over the last several years, it will be important for senior management to continue to be prudent in their underwriting practices and in monitoring any emerging risks in their portfolios. the economy continues to show a strong trajectory, but of course we need to remain alert to any potential slowdown. as second district community banks grow in line with their national peers, we are encouraged by the increased reliance on core funding and strong asset quality. we will, however, continue to monitor developments that may pose a risk to the safety and soundness of the financial and banking system. fintech a second major change for community banks — like all banking institutions — is the potential competition from new “ fintech ” firms. since 2012 there has been over $ 40 billion in us - based fintech investments including online lending - based platforms, capital markets, and payment and 2 / 4 bis central bankers'speeches settlement services. 2 by offering traditional financial services to customers through new, innovative platforms and channels, these fintech firms pose a challenge to traditional banking business models. many community bankers are taking a proactive, forward - leaning approach to these new technologies with a focus on how they can be leveraged to improve their business and benefit their customers. among the opportunities community bankers have highlighted during our discussions

are : technological solutions that reduce back office costs ; more efficient loan processing ; and an improved customer experience through smartphone applications and other mobile technology. this proactive perspective leverages innovation as a strategic differentiator and competitive advantage, rather than just a means to enhance efficiency. the speed and magnitude of these changes also have implications for us as supervisors. we must keep pace and understand the risks associated with innovation so that we can appropriately focus our supervisory efforts on new operational, compliance, and reputational risks. for example, supervisory and regulatory letter 13 – 19, “ guidance on managing outsourcing risk, ” provides supervisory expectations on partnering with outside vendors. while supervisors can provide some focus on emerging risks, it is ultimately the responsibility of each firm and its board to identify the relevant risks associated with new technologies and make appropriate and prudent business decisions for their institutions and customers. cybersecurity the potential benefits associated with these new technologies are accompanied by the risks posed by cybersecurity. cybersecurity risks, the third topic on my list, continue to raise challenges for all types of firms in the financial system, ranging from supervised banks to financial utilities to non - bank financial firms to government agencies. while these entities differ in size, purpose, and mission, the common threats associated with cybersecurity represent a universal concern. indeed, in my regular meetings with supervisory colleagues and supervised institutions, cybersecurity is almost always at the top of the risk list. frequently cited challenges by local institutions include : attracting and retaining information technology talent, as these skilled individuals are in high demand and implementing a sufficiently robust vendor management program for technology services outsourced to third - party providers. while we expect firms to adequately manage a number of financial and operational risks such as credit risk, market risk, and operational risk, the nature of the cybersecurity risk differs in one key aspect – motivation. a cybersecurity attacker might be a nation - state or hacker with the intention to disrupt or damage a critical infrastructure sustaining the u. s. and global economy. or, the attack may be financial in nature, where the perpetrator is engaging in fraud and seeking to profit. these motivations suggest that the cyber threat is more intentional than other risks. this intentionality coupled with the resources of some perpetrators raises the stakes significantly and makes cyber defense much more difficult. we recognize that addressing the cyber threat is a complicated and expensive undertaking, but it is an essential one. all