A Conference of State Bank Supervisors (CSBS) analysis maintains community bankers’ outlook regarding economic conditions has reached lowest recorded level since the survey began in 2019.
According to the CSBS Community Bank Sentiment Index, the community bankers’ sentiment stems from regulatory, monetary policy, future business conditions and reduced future profitability concerns.
“Community banker sentiment has been pessimistic for six straight quarters,” CSBS Chief Economist Tom Siems said. “They are navigating the effects of higher interest rates that have stressed liquidity, lending growth and fixed-rate securities portfolios. Moreover, following the high-profile bank failures earlier this year, community bankers are more concerned about regulatory overreach.”
The Index surveyed community bankers nationwide in the last month of each quarter to garner thoughts on future economic conditions in seven areas. An index reading of 100 represents a neutral sentiment while anything above 100 indicates a positive sentiment. Anything below 100 indicates a negative sentiment, per authorities.
Quarterly results are included in the Federal Reserve Economic Data, the online database maintained by the Federal Reserve Bank of St. Louis, known informally as the FRED, according to the CSBS.
According to the survey, 95 percent of surveyed community bankers believe the domestic economy is currently in a recession.
Additionally, the CSBS said that at 68, the profitability component had the greatest quarterly decline for the third consecutive quarter, falling 14 points from Q1 2023 and down 33 points from one year ago.
The regulatory burden component remains the lowest at 18 points, dropping four points from last quarter to its lowest recorded level.