Funding and cybersecurity top the concerns for community banks, according to the latest annual community bank survey conducted by the Conference of State Bank Supervisors (CSBS). It is a marked shift from previous years, when regulatory compliance costs were found to be the chief issue for community banks. The survey was released in the conference volume of the seventh annual Community Banking in the 21st Century research and policy conference. The conference, which is sponsored by the Federal Reserve System, CSBS and the Federal Deposit Insurance Corp., is hosted each fall at the Federal Reserve Bank of St. Louis.
This year, 36% of banks said funding costs were the most likely factor to influence future profitability, up from 11% in 2016. More than 70% of respondents ranked cybersecurity as their most important risk. Only 4% of surveyed banks said that regulation was most likely to influence profitability, compared to the 60% of respondents who named it as a top concern two years prior.In its sixth annual survey, CSBS canvassed 571 community banks in 37 states. Other key findings include:
- Compliance-related costs increased 4% this year, in contrast to the 13% drop 2018; however, with a total of $4.9 billion, those costs are much lower than the peak of $5.4 billion set in 2016.
- Nearly 30% of bankers considered depopulation an important limitation to retaining core deposits.
- While last year’s survey showed community banks were embracing technology, the actual number of those offering digital and online services remains largely unchanged due to cost.
An additional section called “Five Questions for Five Bankers” accompanied the survey, providing context for the national survey results at the state level during the same three-month period. State bank commissioners asked five questions to five community bankers in 30 states.
The questions addressed the effectiveness of the Economic Growth, Regulatory Relief and Consumer Protection Act, the community bank business model, funding and liquidity concerns, technology and cybersecurity.
To access a PDF of the conference volume, click here.