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Special Questions

Special Questions

May 2021

For this survey, respondents were asked supplemental questions on the impacts of the COVID-19 pandemic, profitability and expectations. Data were collected May 4–12, and 66 bankers responded to the survey.

Results Tables

1. Approximately what share of your customers have shut down their business due to the coronavirus (COVID-19), either temporarily or permanently?
  May '20
Dec. '20
May '21
Temporarily shut down 19.3 9.1 6.3
Permanently shut down 1.3 1.8 2.0

NOTES: 52 responses. Averages are calculated as trimmed means with the lowest and highest 5 percent of responses omitted.

2. How do you expect profitability over the next six months to compare with the past six months?
  May '21
Higher 48.5
No change 28.8
Lower 22.7

NOTE: 66 responses.

2a. What are the factors behind the expected increase in profitability?

This question was only posed to those expecting higher profitability over the next six months. These comments are from respondents’ completed surveys and have been edited for publication.

  • Higher loan volume in agricultural production operating loans.
  • Vaccinations, the opening up of the economy and pent-up demand.
  • We expect cash balances to be redeployed into increased loan demand and/or investments with rising rates of return and the potential release of allowance for credit losses.
  • Growth in earning assets and reduction in cost structure.
  • Deposit rates adjusting to the market.
  • PPP [Paycheck Protection Program] fees.
  • Slightly higher margins.
  • Yield curve, improving economy, increased loan demand.
  • PPP fees.
  • Success with the vaccination process and the reduction in the number of COVID cases.
  • Loan growth has been strong.
  • Improved housing availability.
  • Lower cost of funds.
  • Higher interchange fees as consumers spend stimulus dollars, and few deposit and consumer loan charge-offs with all of the liquidity.
  • PPP.
  • PPP fee recognition, decrease in provision for loan losses.
  • Increased loan demand and increased rates due to inflation.
  • The declining net interest margin experienced over the last 12 months has finally leveled off, so we can expect to improve our earnings with additional loan/investment volume.
  • Recognizing PPP fee income as the loans are forgiven; this will offset margin compression.
  • Volume increase.
  • Increased spending due to multiple stimulus checks and increasing consumer confidence.
  • People taking off their masks and going out and spending money again.
  • Improvement in the rate environment and increased loan demand.
  • Improved oil and gas prices, higher employment and consumer spending, more business and leisure travel expenditure, restaurants opening back up to 100 percent occupancy.
  • Higher average loans, PPP fees.
  • Continued demand for mortgage loans.
  • Growth and improved operating leverage.PPP fees.
  • Return to more normal activity due to vaccination percentages increasing.
2b. What are the factors behind the expected decrease in profitability?

This question was only posed to those expecting lower profitability over the next six months. These comments are from respondents’ completed surveys and have been edited for publication.

  • Rate environment.
  • Low interest rate environment and low loan demand.
  • Loan yields are resetting down on each renewal. Bond yields are low. There is some increase in other operating costs.
  • Compressed net interest margins.
  • End of PPP fees and declining net interest margins.
  • Fee income related to PPP loans is not sustainable at the current levels. Our net interest margin without the fee income from PPP has dropped over 70 basis points in the last 12 months.
  • Tighter margin. Less fee income from PPP.
  • Loan volume and no more PPP fees.
  • Low interest rates on investments and loans.
  • Interest margin squeeze.
  • Lower net interest margin, increased data processing costs.
  • Decreased loan balances due to paydowns. Higher deposit balances due to parked funds.
  • Lower loan activity and lower yields.
  • The current trend among our members (customers) is they have been paying off unsecured debt with funds from federal stimulus or by borrowing against their home equity.
3. Over the next six months, in what loan category do you expect to see the strongest loan growth? Please exclude any PPP loans.
  May '21
Commercial Real Estate 36.9
Residential Real Estate 36.9
Commercial and Industrial 16.9
Consumer Loans 9.2

NOTE: 65 responses.

4. Over the next six months, what do you expect for loans currently on payment deferral or otherwise modified due to the coronavirus (COVID-19)?
  May '21
75% or more will become fully performing 58.5
50-74% will become fully performing 1.5
25-49% will become fully performing 1.5
Less than 25% will become fully performing 3.1
Not applicable; we do not have any loans currently on payment deferral or otherwise modified due to the coronavirus (COVID-19) 35.4

NOTES: 65 responses.

5. Over the next 12 months, what is your expectation for long-term interest rates?
  May '21
Higher 48.5
No change 50.0
Lower 1.5

NOTES: 65 responses.

Special Questions Comments

These comments have been edited for publication.

  • We are seeing increased activity from customers, especially after the last round of stimulus funds. We hope that interest rates will begin to rise sooner than later, as the sustained low interest rate environment is shrinking our margin.
  • We are concerned about the increase in supplies and labor in the housing market. What goes up usually comes down, and while all of the dials on the dash look OK for the moment, we are trying to look over the horizon for an adjustment. With inflated appraisals and inflated material costs and extremely low interest rates, it seems as if we are setting ourselves up for a correction.
  • The majority of our customers either temporarily shut down or modified operations as a result of COVID-19. This includes dentists, doctors (elective surgeries), dine-in restaurants, entertainment industries, retail clothing stores and dry cleaners. Within our customer base, one customer has permanently shut down.
  • We expect growth in both residential and commercial real estate lending.

Questions regarding the Banking Conditions Survey can be addressed to Emily Kerr at

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