Community bankers were more upbeat about business conditions and the regulatory environment to end last year, according to the latest quarterly survey from the Conference of State Bank Supervisors (CSBS).

The CSBS Community Bank Sentiment Index increased to 127 in the fourth quarter, up 35 points from a year earlier. Overall, bankers are the most upbeat since the survey began in 2019.

The index measures seven components of sentiment, all of which are now at or above 100 for the first time. A reading above 100 indicates positive sentiment. More than 250 community bankers from 42 states responded to the survey, whose results are included in economic data maintained by Federal Reserve Bank of St. Louis.

The survey showed that views on the regulatory climate brightened the most. The reading on the regulatory burden improved by 80 points over the quarter, reaching 100 for the first time. That indicates that bankers are now neutral on the outlook for the regulatory climate this year. That reading hasn’t been above 30 since early 2021.

“Over the past four years, the majority of community bankers have been concerned with the possibility of a more burdensome regulatory environment,” CSBS Chief Economist Tom Siems said.

In the survey’s open-ended comments section, many bankers said they were optimistic that regulatory burdens on smaller institutions will improve. However, they also noted this would take time and that the economy has vulnerabilities and could get worse before improving.

At 136, the component measuring profitability also hit a new high, up seven points from the previous quarter.

Sentiment on monetary policy declined by six points to 119 but remains in positive territory for the third straight quarter. 

Siems said the more positive outlook is likely due to the election results, though he noted that post-election, bankers were still evenly split on whether regulations will be lighter or heavier this year.