Independent Banker - August 2021 - 41

XHofer: The PPP has infl ated our
balance sheet at a rate that we would
not normally care to experience.
However, the fee income has relieved
the margin pressure. The PPP has
also enabled our bank to create a
tremendous amount of goodwill
within the communities that we
serve, solidifying long-standing
customer relationships and attracting
new customers.
Q: What role has the PPP played
in your community bank's deposit
gathering activities?
XStandard: Deposit gathering has
grown over the past year, as many
borrowers in the fi rst round held
onto the PPP loans until they were
forgiven. Even after that, the funds
were used to support small businesses
throughout our markets. I believe
the second round will be used for the
same support but will not generate as
much deposit growth.
XNutt: We hoped that by off ering
[PPP loans] in our communities
we would get new customers into
the bank and be able to create new
deposit customers based on the
service level we provided in PPP
[lending]. We have seen this come
to fruition.
XDrake: We also saw-and continue
to see-large deposit increases. Last
year, we increased deposits by over
20% and most have stayed with us.
Q: Most community banks'
funding sources have been heavily
aff ected by recent economic
stimulus that could result in a
return to more traditional, albeit
higher, rate levels. How do you
think this will aff ect the CFO role?
XdeMilliano: The additional
stimulus payments that have been
provided by Congress directly
to individuals and families have
contributed to additional deposit
growth. This growth created an
additional challenge for me in terms
of managing our net interest margin
and controlling interest rate risk.
XStandard: Strong deposit growth
has also aff ected my role as CFO, as
I work to fi nd investment vehicles
for better net interest income until
loan demand catches up with the
deposit growth.
XDrake: With the excess amount
of liquidity, we have to worry about
not only current earnings, but also
future interest rate risks. Do you seek
income now knowing excess cash
earns nothing? Or do you not deploy
it because you think conditions will
change and interest rates rise? Every
day is interesting.
Q: Do you feel the budgeting
and planning process has or
will change due to ongoing
uncertainty in the economy?
XStandard: Yes, it has changed. We
did not forecast the deposit growth,
PPP growth or balance growth that
has occurred. Net income has been
better than forecast. However, net
interest margins are lower and will
be impacted over the remainder
of 2021. Liquidity is much higher
than projected due to higher deposit
growth. Uncertainty over what will
occur next, or what action the U.S.
government may take, will be a
primary issue throughout this year
and next year as well.
XdeMilliano: Budgeting and
planning for 2021 has been
challenging given the timing of PPP
forgiveness for round one loans
and the acceleration of PPP fees as
loans are paid back. Also, during
our normal budgeting timeframe,
vaccinations were in preliminary
testing stages and our state had one
of the most restrictive health orders
in the country, which signifi cantly
restricted small businesses. With
this backdrop, we budgeted for less
net income in 2021, due to margin
compression and a slower recovery
and return to normal. So far, we are
" [COVID-19]
obviously sped
up the digital
adoption in
community
banks. I believe
it has helped
us focus on the
right risk and,
in turn, allowed
us to focus our
technology in the
right areas. "
-STEVEN S. NUTT,
COMMUNITY NATIONAL
BANK & TRUST
Read their 2020 answers
To read last year's CFO
roundtable with many of the
same chief financial off icers,
visit bit.ly/CFO2020_ib
independentbanker.org Q 41
http://www.bit.ly/CFO2020_ib http://www.independentbanker.org
Independent Banker - August 2021

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