Independent Banker - August 2021 - 42

CFO ROUNDTABLE
fairly close to our projections and feel
more optimistic about the second half
of the year.
XHofer: I believe the budgeting and
planning process for most institutions
will become more fl exible. I say this
with the expectation that economic
recovery from the disaster we call
2020 is going to take years, not
months. With the exception of some
outliers, I believe we will see most
community banks taking a moderately
conservative approach to growth for
the next few years.
XNutt: I also think that, going
forward, modeling " what ifs " and
stress testing will be emphasized at
the board level as much-or more-
than budgets.
Q: Inflation is a hot topic right now.
What sort of actions are you taking
ahead of any economic challenges
that lie ahead?
XStandard: I am following economic
reports carefully and reviewing
economic forecasts from a number
of resources to help meet the
challenges that I expect to occur over
the next year or two. I don't expect
that infl ation will get out of hand;
however, that remains to be seen.
No matter what the [Federal Open
Market Committee] predicts, overly
exuberant spending and stimulus
by the government, as well as the
ongoing support from the Federal
Reserve, at some point will have a
negative impact on infl ation and the
economy as a whole.
XDrake: We are watching infl ation
but have not done anything
specifi cally to position ourselves for
any impact. We have excess liquidity
we think will be used, but, like others,
have not found that movement to be
as rapid as projected. Consequently,
we are thinking about investing for
the short, medium and long term
[and] not placing any big bets on a
particular timeframe or outcome.
Some believe infl ation is transitory
Nutt
" COVID brought
to life business
continuity
plans that were
mostly academic
exercises.
We learned
how to assess
operational risk
better through
reviews of
daily processes
versus policy
and practical
applications. "
-JON DRAKE,
PEOPLES BANK
and some believe it to be something
much more impactful. We try to
manage the business we know and
plan for the unexpected, with constant
monitoring to adjust, if needed.
XNutt: Infl ation is a real threat
to the economy given the trillions
pumped in to the economy, which can
obviously lead to economic issues.
We really just continue to emphasize
the basics of banking, making sure
underwriting standards must remain
strong, and not taking extra duration
[or] interest rate risk in the moment
reaching for yield. We continue to
work to fi nd a neutral to slightly assetsensitive
balance sheet to reduce risk
and fl uctuation in earnings.
XHofer: I agree infl ation is a very real
concern. However, given the amount
of government debt, I have a hard
time seeing it ramp up too high or too
fast. We are taking measured steps
to shift our balance sheet to shorterterm
assets and longer-termed
liabilities. The liquidity that we enjoy
today will not be here forever.
Drake
Q: What impact has the pandemic
had on your community
bank's overall risk assessment
capabilities? What have you done
to react?
XDrake: I think COVID brought
to life business continuity plans
that previously were like academic
exercises. We learned how to assess
operational risk better through
reviews of daily processes versus
policy and practical applications. We
also begin to assess risk in terms of it
being something threatening today,
sometime soon or somewhere in
the future?
XNutt: It 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.
XdeMilliano: We have incorporated
our new bank and overall branch
operating processes into all of our
42 Q ICBA Independent Banker Q August 2021
Independent Banker - August 2021

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