A new survey released by the Conference of State Bank Supervisors (CSBS) shows how current economic conditions are being felt by community banks.
The survey, which polled 500 community banks across the country, revealed concerns about the lagging economy, high-interest rates, and geopolitical issues. Specifically, community bankers ranked net interest margins, economic conditions, and loan demand as their highest external risks in the CSBS 2022 National Survey of Community Banks.
“Strong headwinds from stagnating economic growth, high inflation, and rapidly rising interest rates have created another difficult economic environment for consumers and businesses,” CSBS Chief Economist Tom Siems said. “But just like during the pandemic and economic lockdowns that started in 2020, community bankers across the nation will again show their value as relationship lenders that can be trusted to help their customers get through tough times.”
In addition, the bankers cited cybersecurity as the highest internal risk, while staffing issues – up 10 percent from a year prior – were also seen as a concern. Further, the bankers described inflation as a persistent but manageable challenge. Also, while the percentage of bankers who said the adoption of new technologies doubled over the past three years, high costs related to technology continue to be a concern.
Looking ahead, community bankers expect relationship-based lending to expand more than transactional lending.
The survey results were released at the Community Banking Research Conference on Sept. 29. The conference is sponsored by CSBS, the Federal Reserve System, and the Federal Deposit Insurance Corporation.