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Federal Reserve and CSBS Release 2015 Community Banking Report


ST.  LOUIS — The Federal Reserve System and the Conference of State Bank Supervisors (CSBS) today released Community Banking in the 21st Century: Opportunities, Challenges and Perspectives, a report that details conditions facing today’s community bankers.  The report was produced and released in conjunction with the third annual Community Banking in the 21st Century research and policy conference, hosted by the Fed and CSBS at the Federal Reserve Bank of St. Louis on Sept. 30-Oct.1 2015.

The report can be found at on the community banking research conference website at

This is the third year the report has been published and the second year featuring the National Survey of Community Banks.

The 2015 survey was developed and administered with the assistance of Cornell University’s Survey Research Institute (SRI). It was distributed to community bankers by state bank commissioners in 39 states and provides a comprehensive view of what bankers are thinking about key issues facing their industry and how they are responding to changes in their markets. The survey covers issues such as the regulations most impacting community banks, the narrowing of mortgage lending product offerings, and the evolving mix of other products and services.

In addition to revealing trends in competition and consolidation, the survey results show how compliance costs are affecting community banks.  Respondents to the 2015 survey reported that regulatory compliance accounted for 11 percent of personnel expenses, 16 percent of data processing expenses, 20 percent of legal expenses, 38 percent of accounting and auditing expenses and 48 percent of consulting expenses. To the extent that these percentages are accurate and representative of the community banking industry, they imply a hypothetical compliance cost to community banks, in these areas alone, of $4.5 billion annually. This would represent 22 percent of their net income.

The second part of the report is a summary, in narrative form, of town hall meetings and associated roundtable discussions among regulators and bankers across the country.  State regulators from 27 states conducted town hall meetings with their community bankers, asking questions about local economic conditions, borrower attitudes, unmet financial services needs in the state, current regulatory challenges, and more.

While each state’s community banks reported opportunities and challenges unique to their markets and local communities, some common themes emerged from the town hall meetings.  For example, while bankers typically considered safety and soundness exams to be helpful, compliance exams were seen as more burdensome.  Community banks also reported that customers are still somewhat risk averse, that they are struggling to maintain talented staff, and that not enough consumers are financially savvy.

Together, the survey and town hall narratives provide valuable insights that can be used to better understand and further the development of the community banking industry.