Community bankers across the U.S. remain largely optimistic about the year ahead, though emerging anxieties surrounding inflation, monetary policy and geopolitical conflicts are beginning to temper their confidence.
That’s according to the latest quarterly survey released by the Conference of State Bank Supervisors (CSBS). The release notes that in the first quarter of 2026, the Community Banker Sentiment Index slipped one point from the previous quarter to a reading of 131, dropping two points from its record peak six months prior.
Nonetheless, the overall index remains well above the neutral benchmark of 100 — where anything above that level indicates positive sentiment — signaling continued optimism for the upcoming year.
The headline number masks a growing divergence in how bankers view their internal operations versus the external macroeconomic environment. Survey components measuring profitability, operations expansion and franchise value all increased during the first quarter and remained strongly in positive territory. Meanwhile, indicators tracking outlooks on monetary policy and regulatory burden dropped sharply by 13 points and eight points, respectively.
On the regulatory front, optimism has faded somewhat, though the overall environment is still viewed favorably compared to recent years.
The regulatory burden indicator landed at 122, an eight-point decline from the previous quarter’s record-high reading. Despite the dip, it represents a stark contrast to the 15 consecutive quarters between early 2021 and late 2024 when the indicator consistently hovered below 30, signaling expectations of a heavy and restrictive regulatory burden.
Survey respondents specifically cited the macroeconomic ripples of the Iran war as primary headwinds. Bankers voiced concerns over how the conflict might impact the U.S. economy, specifically pointing to inflation driven by higher oil prices, raised recession probabilities and the potential trajectory of the Federal Reserve’s monetary policy decisions.
“While bankers have greater uncertainty about national economic conditions, mainly due to potential impacts from the Iran war, they remain optimistic that their loan portfolios in their local economies will lead to higher profitability and franchise values,” commented CSBS Chief Economist Tom Siems in the release.
Community banks have maintained a tight grip on single-family home lending in recent years. An annual report released by the Community Home Lenders of America in January found that independent mortgage banks maintained an 84.1% share of all single-family mortgage loans as of November 2025.
