Community bankers are optimistic over future economic conditions halfway through this year, according to the Conference of State Bank Supervisors..The Q2 Community Bank Sentiment Index dropped two points to 129, only four points from its record 133 late last year, according to the July 13 report. The profitability index increased nine points, returning to its record of 152 reached in the first quarter of 2025. The index has been at least 129 for eight straight quarters. Any reading higher than 100 indicates positive sentiments. Any reading under that mark shows negative sentiments. The index measuring future business conditions dropped one point to 99. It has been above 100 only once since 2021, reaching 117 in the fourth quarter of 2024. The monetary policy index fell 11 points to 96, its first time not being above 100 since the end of 2023. The regulatory burden component dropped nine points to 113, 17 points under its record of 130 nine months ago. CSBS Chief Economist Tom Siems said the report suggests “regulatory conditions might not be easing as much as last quarter’s survey indicated, and bankers have a slightly pessimistic outlook regarding the future impact of monetary policies.“Their primary concerns center on the potential negative macroeconomic outcomes that might arise from geopolitical uncertainties due to the ongoing war in Iran,” he added. “Even so they remain optimistic that for the foreseeable future, their loan portfolios in their local economies will lead to higher profitability.” Bankers cited cyberattacks, bank fraud, labor costs and availability, competition and the federal debt/deficit as top issues. They also listed concerns around deposit competition, monetary policy uncertainty, deficit spending by the federal government and regulations perceived as disproportionately impacting smaller banks and businesses.
