CSBS Releases 2026 Annual Survey of Community Banks

Community bankers across the nation ranked net interest margins and core deposit growth as their top external risks, at functionally the same importance, according to the Conference of State Bank Supervisors’ (CSBS) 2026 Annual Survey of Community Banks that was released today. Similarly, the cost of technology and cost of funds ranked third and fourth, respectively, with economic conditions not far behind at fifth. Regulation continued its decrease in importance, down to the eighth top risk from the sixth spot last year. This is marked decline from its spot tied for the top external risk in the 2024 survey as community bankers have grown accustomed to the current regulatory environment.

The complete survey can be found on the CSBS website at: https://www.csbs.org/survey.

On the internal side, cybersecurity continued to be the most impactful internal risk. Once again, the share of community bankers reporting this as an extremely important risk (57%) surpassed all other risks — both external and internal — by a comfortable margin. Technology implementation was considered slightly more important than credit risk for the second spot. Staff retention came in the fourth spot. This year’s special questions focused on fraud, stablecoins and artificial intelligence.

Other key findings and insights from the 2026 survey include:

• More than half of respondents indicated that they were unsure as to when inflation would return to the price stability target of the Federal Open Market Committee, or that they expect it to occur beyond 2029. This represents a sizable increase from last year’s survey, when 30% of respondents were “unsure” or thought that the 2% target would occur in “2028 or later.”
• Cybersecurity was identified as the top internal risk for the ninth year in a row, followed by technology implementation and costs. Interest rate risk, which was called market risk in last year’s survey, rose from
• the lowest internal risk to the fifth highest internal risk this year, likely reflecting the shifting interest rate environment.
• More respondents have established relationships with fintech providers this year, with 33% of respondents utilizing fintechs for mobile banking support.
• Community banks continue to compete most intensely with one another for small-business, commercial real estate, and agricultural loans. Meanwhile, they compete most heavily with regional or national banks with a physical market presence for payment and wealth management/retirement services, and with credit unions for small-dollar unsecured loans.
• Banking market competition remained the primary challenge to retaining core deposits, followed by economic uncertainty. Fintech competition was the third cited risk, with 45% of respondents rating it as an “extremely important” or a “very important” challenge to their business, up from 34% last year.
• In response to an open-ended special question regarding regulatory changes and their impact over the past 12 months, bankers revealed a cautiously optimistic outlook. Most noted that overall regulatory relief was having a positive impact, although many expressed concern that such relief may be short-lived.
• In another special question, concerning the impact of stablecoin adoption on their banks, close to 60% of the respondents reported they saw deposit erosion and reduced lending capacity, and uneven regulatory implementation or regulatory arbitrage, as the “most impactful” or “moderately impactful” to their banks.
• When asked about their current use of AI, about 53% of respondents indicated that they were piloting AI technology or engaging in limited use across specific functions.