By Evan Sparks
Community banks are making concrete plans for digital assets.
Double-digit shares of community bankers intend to offer tokenized deposits and stablecoin solutions within the next 12 months, according to the Conference of State Bank Supervisors’ 2026 community bank survey released today. For the first time, CSBS asked about bankers’ offering of tokenized deposits and stablecoin services. While roughly 8 in 10 community bankers said they did not offer these services and did not plan to in the next year, 18% said they would offer tokenized deposits within the next year, and 16% said the same thing about stablecoin solutions.
Approximately 4% of community banks currently offer tokenized deposits, but half of these said they planned to exit within the next year. Three percent of bankers said they offered stablecoin solutions, but two-thirds of these said they also planned to exit this product offering.
Looking at stablecoins over a longer horizon, half of banks indicated no longer-term plans to engage with stablecoins, while 37% said they would participate in stablecoin networks through their core providers, 12% said they would partner with existing issuers and 2% said they would provide custody services to stablecoin issuers and holders. Bankers were generally aware of potential negative effects of stablecoins, with 60% saying stablecoins would have a moderate or significant effect on deposit erosion and just 16% identifying new revenue and fee opportunities from stablecoins as a moderate or significant effect.
In the world of payments, 38% of banks now accept FedNow payments and 18% plan to do so in the next year, which would bring adoption above half. A smaller share, 14%, offer the capacity to send FedNow payments, but on net 31% more say they will offer FedNow send payments within the next year.
Other products and services that rank highly among those bankers plan to offer in the 12 months are online account opening (30% on net), online loan closing (17%), online loan applications (16%) and e-signature verification (13%). On net, approximately 11% of community banks said they planned to offer cryptocurrency services within the next year. (Half of community banks said that meeting customers’ crypto-related needs was not at all important, and just 6% said it was very or extremely important.)
Core satisfaction remains low
Bankers expressed general satisfaction with most of their tech providers, with two exceptions: core service providers and workflow processing. More than a quarter of community bankers are dissatisfied with their cores, and 5% are extremely dissatisfied. Less than half said they were satisfied with their core providers.
With more than 9 in 10 banks outsourcing some or all of their core processing and customer-facing technology, vendor availability is critical to banks’ ability to meet consumers’ demands. The three most promising technological developments bankers identified were expanding their mobile banking services, adopting fully integrating loan processing systems and deploying AI tools for customer interactions.
Four in 10 banks said cost and implementation challenges were their biggest challenge to adopting new technologies, followed by 18% who said their core’s limitations were the biggest impediment, and 16% who said the same of cybersecurity risks.
Top risk factors
Community banks continue to feel the pinch of a higher rate environment. Rate-related concerns — net interest margins, core deposit growth and cost of funds ranked as three of community bankers’ four top external risks, with technology costs coming it at number three. Nearly 80% rated NIMs as an extremely or very important external risk, while 79% said the same thing about core deposit growth, 75% about tech costs and 74% about cost of funds. While the share with strong concerns about NIMs fell from 88% last year, it remained the top external risk bankers identified.
The share of bankers extremely or very concerned about regulation as a risk factor fell from 89% in 2024 to 64% in 2026. Other external risks that ranked lower included loan demand and the ability to attract the right workforce.
Interest rates are responding to inflation — and even though inflation fell from 2022 highs, it remained about 1.7 percentage points above the Fed’s long-run 2% target. Roughly two-thirds of bankers said that inflation was “most or moderately impactful” on their personnel expenses and costs of deposits, with nearly four in 10 saying inflation had the biggest effect on costs of deposits. While 80% of bankers said they expected inflation challenges to persist, the same share said these challenges were manageable.
In every year since the question was asked in 2018, cybersecurity has remained at the top of bankers’ internal risk concerns, with 95% ranking it extremely or very important, slightly up from 2025. Other top internal risk factors included tech implementation and costs (75%), credit quality (72%) and staff retention (71%). The lowest-ranked internal risk factors were operational risk outside of cyber and succession planning (55%), Bank Secrecy Act/anti-money laundering compliance (52%) and consumer/fair lending compliance (41%).
Evolving competition
For commercial real estate loans, small business loans and deposits, banks’ chief competitors are other banks, largely community banks and regional or nationwide banks with a physical presence in the market. One-third of banks said nonbanks were their principal creditor for agricultural lending (that is, the Farm Credit System), and about a third of bankers said that credit unions were their biggest competitor for small-dollar unsecured loans — the first time credit unions reached this rank.
Community bankers felt that single-family mortgages, deposits and commercial real estate loans were the most competitive products they offered. Competition was the biggest challenge to attracting and retaining core deposits, with 74% saying it was an extremely or very important factor, although this was fewer than in the previous two years. Cost of funds and cost of deposits fell for the third straight year.
M&A trends
As merger activity rebounded to 2021 levels in 2025, 6 percent of banks said they received and seriously considered an M&A offer in the previous year, while 16% said they had made an M&A offer. The top-rated reasons for potential sellers to consider an offer were excessive costs of doing business (68% extremely or very important), inability to achieve economies of scale (63%) and shareholder liquidity needs (58%). Prospective acquirers were most motivated by achieving economies of scale (80% extremely or very important) and entering a new geographic market (67%).
