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Survey Says ...

As it did for many aspects of our lives, the COVID-19 pandemic dramatically changed the game for community banks. Higher interest rates, spurred by post-lockdown inflation, have pressured net interest margins and refocused banks on retaining depositors, who proved fickle amid last year’s banking crises and hotter competition on deposit rates.  

RMA’s latest Community Bank Survey explores the top concerns of community bankers as they navigate this post-pandemic era, and the steps they are taking to adapt to this new norm. That includes managing the spillover effects of higher interest rates in areas such as liquidity and finding new ways to boost revenue and cut costs to improve net interest margins.  

Meanwhile, cyber risk continues to consume a large amount of bank resources and focus. As one respondent said: “Of all the risks, it’s the one area where individuals are actively seeking to do harm to institutions.” And attracting and retaining talent remains challenging, including filling the technology jobs necessary to keep up with the needs of an increasingly digital industry.  

About a third of the 210 survey respondents were CEOs or reported to the CEO, 23% were senior managers, and 22% were middle managers. The majority (66%) of them represented banks with assets of $1 billion to $10 billion.  

Here are the key takeaways from their responses:  

  • High-for-longer interest rates continue to dominate concerns and activity.  
  • Net interest margins are under pressure and banks are trying to compensate.  
  • Depositor flight during the regional bank crisis created liquidity concerns. 
  • Credit risk, always a focus, is getting even more attention.  
  • Bank outlooks vary on office space risk.  
  • Attracting and keeping talent is tough, even as big banks lay off workers.  
  • Most banks will spend more time and resources managing cybersecurity risk this year.  

While no one can say for certain what’s ahead, community banks have prepared for a range of possibilities and a complex mix of risks. To dive deeper into RMA’s Community Bank Survey, click here