The Community Bank Sentiment Index is an index derived from quarterly polling of community bankers across the nation. As community bankers answer questions about their outlook on the economy, their answers are analyzed and compiled into a single number. An index reading of 100 indicates a neutral sentiment, while anything above 100 indicates a positive sentiment, and anything below 100 indicates a negative sentiment.
The Quarter 2 2020 Community Bank Sentiment Index Number is:
This represents a significant negative reading in economic sentiment by community bankers, coming in one point lower than the First Quarter 2020 index of 91 and 32-points lower than last year’s Second Quarter 2019 index of 122. Community banker sentiment from the COVID-19 pandemic and the subsequent economic lockdown continues to take a toll.
- Five of the seven CBSI components declined in Q2 2020 relative to Q1 2020, although the index stayed roughly the same overall (90 versus 91) due to large increases in the business conditions and monetary policy components
- 54% of bankers believe business conditions will be the same (22%) or better (32%), up from 47% in the Q1 2020 survey (40% same and 7% better)
- 65% of bankers believe the economic impact of the Fed’s monetary policies will be the same (50%) or better (15%), up from 38% in the Q1 2020 survey (27% same and 11% better)
- 64% of banks expect future profits to decline, an increase from 53% last quarter
- 69% of bankers expect their franchise value to be the same (43%) or better (26%), down from 75% last quarter (34% same and 41% better)
- 94% of bankers expect the regulatory burden to be the same (47%) or heavier (47%), compared to 87% last quarter (56% same and 31% heavier)
- Overall, it appears that community bankers remain concerned about a heavier regulatory burden as well as the health of the economy and how it might negatively impact future profitability and franchise value