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Banking Conditions Survey

Special Questions

Banking Conditions Survey

Special Questions

November 2021
For this survey, respondents were asked supplemental questions on profitability and expectations. Data were collected November 1–9, and 69 bankers responded to the survey.
1. How do you expect profitability over the next six months to compare with the past six months?
  May '21
Aug. '21
Nov. '21
Higher 48.5 36.5 27.5
No change 28.8 33.8 18.8
Lower 22.7 29.7 53.6

NOTE: 69 responses.

1a. 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.

  • Continued deployment of excess cash into loans and bonds.
  • Increased loan volume and investing in bonds versus short-term investments.
  • Growth in our loan portfolio.
  • Increase in interest rates improving net interest margin.
  • Continued reopening of the economy and a strong consumer.
  • Cost of funds is declining, primarily due to certificate maturities.
  • Increase in loan interest income rising faster than cost of funds.
  • Improvement in asset quality.
  • Decrease in net interest income and slightly improved margin.
  • Improved outlook.
  • Primarily deploying the excess liquidity that we have on our balance sheet into higher-earning assets.
  • Increased net interest margin.
  • Increased loan demand and expected slight increase in fee revenue and interest rates.
1b. 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.

  • Margin compression.
  • Declining interest income margins.
  • Net interest margin decrease and lack of PPP [Paycheck Protection Program] fees.
  • No recurring gains and tighter margins with staff cost pressures.
  • Margin compression and lower PPP-related fees.
  • Increase in labor cost and decrease in net interest margin.
  • Lower margins and fees.
  • Federal interest rates.
  • Net interest margin pressures, additional staff, technology expenses.
  • Interest rate environment and reinvestment risk.
  • No more PPP fee income.
  • Will not have the benefit of PPP loan fees.
  • [No more] PPP loan fees.
  • A low interest rate environment over an extended period of time is putting pressure on our margins as we were not expecting such a drastic decrease in rates in such a quick period of time. We are concerned to extend the duration of our securities portfolio given that we expect rates to begin to increase in the next six to 12 months. This coupled with about 15 percent of our portfolio due to mature in 2022 will make keeping margins up difficult.
  • The end to PPP income and potentially an increase in the corporate income tax rate.
  • Bad loans and health insurance.
  • Regulatory compliance costs and compressed net interest margins.
  • No PPP fees.
  • Decrease in fee income generated from PPP loans. Net interest margin compression due to yields on investments and loans.
  • Fee income from PPP will be ending in first quarter 2022.
  • Increasing personnel expenses—people are leaving for higher pay outside banking, and we have had to raise our overall payroll expense. The interest margin continues to fall. 
  • Margin compression as loan rates and volume continue to stay lower than the historical mean, older higher-rate loans are paid down and investment yield remain low. Also, we are anticipating at least a bit of increase in provision expense for 2022 versus 2021 and continuing salary/wage pressure.
  • Expect loan losses to increase. Interest spread will tighten.
  • PPP fee recognition has been strong over the last six months, and we are nearing the end of the loan forgiveness process.
  • The positive effects of PPP (fee incoming) are going away as the loans are forgiven.
  • No more PPP income.
  • Continued accommodation by the Fed resulting in lower interest rates on investments and loans.
  • Inflation, government regulatory increases (CFPB [Consumer Financial Protection Bureau]), government interference, public becoming scared, i.e., no security at border—bad elements coming into our country.
  • Decrease in loan volume.
  • No loan demand.
  • Reduction of PPP fees.
2. Over the next six months, in what loan category do you expect to see the strongest loan growth?
  May '21
Nov. '21
Commercial and industrial 16.9 48.5
Commercial real estate 36.9 20.6
Consumer loans 9.2 16.2
Residential real estate 36.9 14.7

NOTE: 68 responses.

3. Over the next 12 months, what is your expectation for long-term interest rates?
  May '21
Nov. '21
Higher 48.5 79.7
No change 50.0 20.3
Lower 1.5 0.0

NOTE: 69 responses.

Special Questions Comments

These comments have been edited for publication.

  • We would like to see [interest] rates begin to rise sooner than later. We believe that inflation is high and will persist beyond what is being called “transitory.” We believe the economy has recovered enough that accommodative monetary policy is no longer necessary at the current time.
  • The tapering needs to start now and be completed as soon as possible.
  • In hindsight, it appears the Fed’s emergency rate cut will create some long-term issues for banks to have to deal with. While unintended, we are in for a long haul as a result it appears, combined with the increased federal deficit and the imminent increase in corporate taxes. Seems a storm is coming that we created. I am not passing blame, just commenting on future perceptions at our bank. Our credit standards and pricing for risk will have to tighten as our personnel expense is skyrocketing.
  • We expect interest rates to begin to increase in 2022.
  • Long-term interest rates are likely to be higher but not significantly. Inflation is with us, and the Fed will need to fight it to some degree.

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

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