Banking Conditions Survey

Results Summary

Historical data are available from March 2017.

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Respondents were given an opportunity to comment on any issues that may be affecting their business.

These comments are from respondents’ completed surveys and have been edited for publication.

• Additional regulatory requirements like the Bank Secrecy Act, data governance, etc. require so many more employees that they are contributing to increasing cost. That makes it harder to give investors a fair return on capital.
• High interest rates, labor costs and the housing inflation are having an increasingly adverse impact on loan demand and credit quality. I expect the impact to gradually worsen over the next six months, all things being equal.
• The macro impacts of higher-for-longer are resulting in decreased economic growth.
• We feel Texas is healthier than the rest of the country. Generally, we are concerned that as long as unemployment remains low, if the Federal Open Market Committee (FOMC) lowers rates prematurely, the economy will expand and reignite it. We are also concerned about the polarizing election and economic impact from that and from tax and stimulus sunsets in 2026. Our greatest concern is how the government will disrupt the economy given its huge size and lack of coordination with monetary policy.  We feel it is and can be very destructive.
• The Federal Reserve appears to be ignoring the number of bankruptcies and layoffs that continue to negatively affect stores that employ and sell products to the lower and middle class. FOMC action that would lower the federal funds rate could greatly improve historically depressed bank net interest margins.
• We are experiencing a slowdown in all categories of loans. 
• Interest rates are not declining as anticipated. The upcoming presidential election, inflation issues, regulatory burdens, rising consumer debt levels and the high price of autos [are sources of concern].
• The regulatory burden being placed on banks by the Office of the Comptroller of Currency, the Federal Deposit Insurance Corporation and the Consumer Financial Protection Bureau (CFPB) has already and will continue to hurt our customers as we bankers try and take care of the financial needs of our communities. Our customers, and our banks, need the government to get off the necks of free markets and let the economy grow without government interference and restriction.   
• Commercial real estate loans originated in 2019 and 2020 on five-year rate adjustments are starting to re-price. We are being pro-active to review these loans. So far, although the rate increases have been significant, we have not observed any cash flow concerns. The consumer spending slowdown has already started to be observed in the restaurant industry in our markets.
• CFPB rulemaking [is having a significant] impact on banking. The latest CFPB effort to curb junk fees on mortgages will drive people out of business if implemented. What will be left are providers outside of the regulatory framework that can create chaos in the system similar to the Great Financial Crisis of 2008.
• We are starting to see people walk away from their auto loans. We don't know if the lower quality of cars produced during the pandemic is a factor contributing to this.