The cost of funds is a growing concern for community banks, according to the Conference of State Bank Supervisors' 2019 national survey
released at an interagency research conference
at the St. Louis Federal Reserve.
The survey found that 35.4 percent of community banker respondents cited funding costs as the biggest influencers on profitability over the next 12 months, while 32 percent cited loan demand and just 4 percent cited regulatory costs.
On the question of the single greatest challenge facing their bank, nearly one-third cited core deposit growth or cost of funds, while 16.4 percent and 15.4 percent cited regulation and competition, respectively.
The CSBS said concerns with funding began to surface at least two years ago amid rising liquidity risk in some community banks as well as higher deposit costs due to increasing interest rates.