ABA Banking Journal
No Result
View All Result
  • Topics
    • Ag Banking
    • Commercial Lending
    • Community Banking
    • Compliance and Risk
    • Cybersecurity
    • Economy
    • Human Resources
    • Insurance
    • Legal
    • Mortgage
    • Mutual Funds
    • Payments
    • Policy
    • Retail and Marketing
    • Tax and Accounting
    • Technology
    • Wealth Management
  • Newsbytes
  • Podcasts
  • Magazine
    • Subscribe
    • Advertise
    • Magazine Archive
    • Newsletter Archive
    • Podcast Archive
    • Sponsored Content Archive
SUBSCRIBE
ABA Banking Journal
  • Topics
    • Ag Banking
    • Commercial Lending
    • Community Banking
    • Compliance and Risk
    • Cybersecurity
    • Economy
    • Human Resources
    • Insurance
    • Legal
    • Mortgage
    • Mutual Funds
    • Payments
    • Policy
    • Retail and Marketing
    • Tax and Accounting
    • Technology
    • Wealth Management
  • Newsbytes
  • Podcasts
  • Magazine
    • Subscribe
    • Advertise
    • Magazine Archive
    • Newsletter Archive
    • Podcast Archive
    • Sponsored Content Archive
No Result
View All Result
No Result
View All Result
ADVERTISEMENT
Home Ag Banking

Bankers Viewpoints Shift as Pandemic Continues, CSBS Annual Survey Highlights

September 28, 2021
Reading Time: 3 mins read
Marketing Money Podcast: When is Too Early to Start Budget Planning?

By Christopher Delporte

What a difference a year can make. We’re still fighting a global pandemic, but according to the Conference of State Bank Supervisors’ eighth annual national community bank survey, bankers’ concerns have changed since last year’s survey. In 2020, local business conditions were top of mind for community bankers. This year, the lingering effect of COVID-19 on local economies has created a new concern: historic levels of deposits and narrow net interest margins. As the pandemic continues, banks report significant liquidity. On the flip side, however, 52 percent of community banks described loan demand as a “very important” challenge with a decline in lending, particularly in the business, agricultural and commercial real estate categories.

“Bankers warily eyed shrinking net interest margins, which they listed as a top external challenge in this year’s survey,” wrote the survey authors, who surveyed 470 banks with less than $10 billion in assets. “They sought new sources of noninterest income, cut expenses and looked for ways to reduce the costs of and better use bloated deposits. One banker summarized the problem as being ‘flush with cash and no loan demand.’”

The Paycheck Protection Program initially bloated bank balance sheets, adding about $145 billion in loans at the end of 2020, according to the survey. The volume of PPP loans declined to $111 billion by June of this year. Lending outside the PPP, particularly in the commercial and industrial sector, was “less robust,” report authors noted. Non-PPP commercial and industrial lending declined by $30 billion, or 10 percent, from December 2019 to June 2021.

“This presumably reflects a preference of business borrowers for the PPP,” survey authors wrote. “But it also may reflect banker preferences. When it comes to extending traditional loans in this sector, where banks must assume the risk of nonpayment, many bankers said they have ‘lost their appetite.’”

The pandemic also created some positive long-lasting effects. More than 40 percent of community bankers said it led to increased efficiency, and more than 70 percent of respondents said prospects for long-term lending were improved by new or closer customer relationships.

“Community bank reputations will be enhanced due to their commitment to serving customers throughout the pandemic by remaining open, by taking aggressive action to protect staff and customers and by issuing loans,” a survey respondent said. “However, how the industry operates may be permanently changed as we’ve figured out how to have non-customer-facing work done at home, as well as non-transactional work done more electronically via email, online and other ways.”

Other important findings from this year’s survey include:

  • Cybersecurity concerns are increasing, with 81 percent of respondents calling it a very important risk, which is more than double the rate of any other type of operational risk noted in the survey. This is up from 60 percent last year. The Bank Secrecy Act is an increasing concern to community bankers, the survey said. A total of 26 percent rated it as “very important,” compared to 20 percent last year. Almost 29 percent of bankers said they were contacted by law enforcement regarding suspicious activities.
  • The COVID-19 pandemic has altered the nature of technological evolution. The cost of technology went from one of the least important issues two years ago to among the most important, with nearly 47 percent of bankers calling it a “very important” challenge. The pandemic created strong incentives for banks to adopt new technologies that meet the needs of their customers. Approximately one-third of respondents increased their online services by more than 50 percent. More than 34 percent said the adoption of new technologies is “very important,” compared to 23 percent last year and 8 percent the year before.
  • Concern about the cost of funds is increasing, described as a “very important” risk by 22 percent of respondents compared to a year ago when, according to CSBC, “it barely registered as a challenge.” Greater concerns with the cost of funds are less obvious in an era of record low interest rates, according to the survey. This may reflect, as one banker said, a continuing effort “to look for low-cost deposits to get [the] cost of funds as low as possible.” It may also reflect concerns with the potential vulnerabilities from competition, according to the survey, which bankers named as their biggest impediment to attracting and maintaining core deposits. “We will continue to pay the lower rates until forced by competitors to increase the rates,” a banker said.
  • Regulation risk is a continuing challenge, with nearly 50 percent calling it “very important.” About 25 percent of bankers considered consumer compliance and compliance generally to be “very important.” Both ranked higher than they did last year. Although the overall costs of compliance declined, the survey said respondents continued to report being “crushed” by “stifling” and increasing regulations. The survey authors, however, noted an attitude shift. Almost all bankers said regulatory guidance on loan modifications was important, at least to some extent, in helping their banks respond to the pandemic. A majority cited similar benefits for a reduced focus on examination activities and more flexible supervision.

ADVERTISEMENT
Tags: Community bankingCOVID-19LendingReal estate lendingRural banking
ShareTweetPin

Author

Christopher Delporte

Christopher Delporte

Christopher Delporte is a senior editor for the ABA Banking Journal and vice president of editorial strategy for member communications at the American Bankers Association.

Related Posts

ABA donates to Texas flood relief efforts, urges bankers to contribute

FDIC issues regulatory relief guidance for Texas

Compliance and Risk
July 11, 2025

The FDIC released guidance with steps intended to provide regulatory relief to financial institutions and facilitate recovery in areas of Texas recently affected by severe storms and flooding.

BIS drafts guidance for central banks on AI adoption

BIS releases report on connections between banks and nonbanks

Compliance and Risk
July 11, 2025

Differences between regulations for banks and those for nonbank financial intermediaries may have created incentives to shift business activities to the NBFI sector, so bank supervisors should apply “close scrutiny” to such interactions, according to the report.

Regulators take issue with discrimination definition in proposed appraisal standards

HUD reverses Biden-era policies on appraisal review

Compliance and Risk
July 11, 2025

HUD eliminated several of the core policies adopted by the Property Appraisal and Valuation Equity task force, an interagency group of 13 federal agencies formed during the Biden administration to address alleged discrimination in the appraisal process.

ABA donates to Texas flood relief efforts, urges bankers to contribute

ABA donates to Texas flood relief efforts, urges bankers to contribute

Community Banking
July 10, 2025

ABA will donate $10,000 to Texas Bankers Foundation to assist with immediate disaster response and recovery following the recent catastrophic flooding in Central Texas.

Budget bill narrowly passes Senate, moves back to House

Breaking down the bank-related provisions in the big budget bill

ABA Banking Journal Podcast
July 10, 2025

Following the enactment of the One Big Beautiful Bill Act, hear from ABA experts on how key ABA-supported provisions on tax policy, rural real estate and health savings accounts in the budget reconciliation law will affect banks.

Fed releases agenda for upcoming conference on large bank capital requirements

Fed seeks public input on large bank rating system revision

Compliance and Risk
July 10, 2025

The Federal Reserve requested comment on a proposal to revise its supervisory rating framework for large bank holding companies to address the "well managed" status of the firms.

NEWSBYTES

ABA, associations seek clarity about Fannie, Freddie credit scoring change

July 11, 2025

ABA DataBank: Copper prices rise on tariff announcement

July 11, 2025

FDIC issues regulatory relief guidance for Texas

July 11, 2025

SPONSORED CONTENT

Navigating Disruption in Ag Lending – Why Tariffs Are Just the Tip of the Iceberg

Navigating Disruption in Ag Lending – Why Tariffs Are Just the Tip of the Iceberg

July 1, 2025
AI Compliance and Regulation: What Financial Institutions Need to Know

Unlocking Deposit Growth: How Financial Institutions Can Activate Data for Precision Cross-Sell

June 1, 2025
Choosing the Right Account Opening Platform: 10 Key Considerations for Long-Term Success

Choosing the Right Account Opening Platform: 10 Key Considerations for Long-Term Success

April 25, 2025
Outsourcing: Getting to Go/No-Go

Outsourcing: Getting to Go/No-Go

April 5, 2025

PODCASTS

Breaking down the bank-related provisions in the big budget bill

July 10, 2025

Podcast: Inside ABA’s new Treasury Check Verification System API

June 25, 2025

Podcast: Staying close to clients amid tariff-driven volatility

June 18, 2025
ADVERTISEMENT

American Bankers Association
1333 New Hampshire Ave NW
Washington, DC 20036
1-800-BANKERS (800-226-5377)
www.aba.com
About ABA
Privacy Policy
Contact ABA

ABA Banking Journal
About ABA Banking Journal
Media Kit
Advertising
Subscribe

© 2025 American Bankers Association. All rights reserved.

No Result
View All Result
  • Topics
    • Ag Banking
    • Commercial Lending
    • Community Banking
    • Compliance and Risk
    • Cybersecurity
    • Economy
    • Human Resources
    • Insurance
    • Legal
    • Mortgage
    • Mutual Funds
    • Payments
    • Policy
    • Retail and Marketing
    • Tax and Accounting
    • Technology
    • Wealth Management
  • Newsbytes
  • Podcasts
  • Magazine
    • Subscribe
    • Advertise
    • Magazine Archive
    • Newsletter Archive
    • Podcast Archive
    • Sponsored Content Archive

© 2025 American Bankers Association. All rights reserved.