Net interest margins are the most important external risk facing community banks, according to the Conference of State Bank Supervisors’ 2025 community bank survey. Core deposit growth ranked second among external risks, followed by economic conditions, cost of technology and cost of funds.
The annual survey – now in its 11th year – found that regulation fell from the top external risk facing community banks to the sixth spot, with community bankers expressing less concern about regulation given the political shift since President Trump took office.
In terms of internal risks, cybersecurity was the issue that most worried community bankers, with 58% citing it as extremely important – the highest percentage among all risks, both internal and external. Technology implementation and related costs ranked second among internal risks, while credit replaced liquidity in the third spot.
Other survey findings:
- Community banks continued to cite other community banks as their largest competitor. However, the largest year-over-year change was in payment services, with competition from nonbanks without a physical presence in the market increasing by seven percentage points.
- Respondents who received and seriously considered accepting an acquisition offer doubled between 2024 and 2025, rising to 12%. Inability to achieve economies of scale was cited as the primary reason for consideration.
- Most respondents indicated they would support changing the current deposit insurance framework, with targeted unlimited coverage and increased coverage scoring the highest among alternative solutions. A majority (72%) viewed a new deposit insurance limit of $500,000 as appropriate.
- Credit and debit card fraud was both the most common type of fraud reported and the largest source of dollar losses, followed by check fraud, and identity theft and account takeover, respectively. Together, these three types of fraud accounted for nearly 88% of total fraud cases and more than 80% of dollar losses.
