Community banker confidence surged to a record high in the third quarter, according to the Conference of State Bank Supervisors..The Community Banking Sentiment Index increased seven points from the second quarter to 133, its highest mark since the survey began in 2019 and 27 points higher than its year-ago mark. Any reading above 100 signals positive sentiment. The monetary policy indicator was a key driver of the gain, jumping 16 points to a record 130. The index has been above 100 since the end of 2023. The Federal Reserve recently reduced its benchmark federal funds rate by 0.25 percentage points, placing the target range at 4.0 percent to 4.25 percent. The profitability component was unchanged from the second quarter at 145, remaining near its record high of 152 six months ago. The regulatory burden index increased one point to 114, remaining above 100 for just the third time in the history of the survey, indicating that bankers have a positive view of their regulatory burden. Future business conditions remained the weakest component of the index at just under 100, but still increased seven points. Community bankers cited concerns over tariffs, immigration, low commodity prices and other challenges. Meanwhile, the Uncertainty Index increased, especially surrounding monetary policy and the economic outlook.CSBS Chief Economist Tom Siems attributed the rise in sentiment to expectations the Federal Reserve’s monetary policies would spark better market conditions. “While overall community banker sentiment has been surprisingly robust this year, uncertainty is rising again as future business conditions and interest rate movements remain cloudy,” he said. A total of 255 community bankers from 44 states participated in the survey.
