The Community Bank Sentiment Index (CBSI) moved past neutral for the first time in more than three years, signaling community bankers nationwide have a brighter outlook.
During the third quarter, the index moved 11 points to 110. This is the first time it has surpassed the neutral level of 100 since the fourth quarter of 2021. Above 100 indicates positive sentiment, and below 100 indicates negative sentiment.
Of the seven indicators, five saw improvement. Profitability, franchise value, and monetary policy components saw significant increases. Business conditions increased five points to 80 while regulatory burden remained at 20 points.
“With the yield curve inverted since late 2022, recent monetary policy decisions appear to have contributed most to raising community banker sentiment,” Tom Siems, Conference of State Bank Supervisors (CSBS) chief economist, said. “However, concerns about future business conditions and heavier regulatory burden continue to put significant downward pressure on overall community banker sentiment. The lagged effects from monetary policy tightening in 2022-2023 and the volume of federal banking proposals and rules may be taking a toll.”
The CBSI surveys community bankers nationwide during the last month of each quarter. More than 300 respondents from 46 states and the District of Columbia participated.
The Conference of State Bank Supervisors is the national organization of financial regulators.