State regulators release annual community bank survey results

The Conference of State Bank Supervisors has released its 2026 Annual Survey of Community Banks, providing key insights into the industry.

“The landscape for community banks is changing rapidly. Stablecoins are creating new competitive pressures, cybersecurity threats are raising the stakes, and artificial intelligence is opening new possibilities and new risks for how banks operate and serve their customers,” said CSBS President and CEO Brandon Milhorn.

CSBS says key findings included the following:

1. For the second consecutive year, respondents identified net interest margins and core deposit growth as the top two external risks.
2. Cybersecurity was identified as the top internal risk for the ninth year in a row, followed by technology implementation and costs
3. Banking market competition remained the primary challenge to retaining core deposits, followed by economic uncertainty.
4. When asked about their current use of AI, about 53% of respondents indicated that they were piloting AI technology or engaging in limited use across specific functions.

The report says that among survey respondents already utilizing AI, “77% said they are using it to assist with fraud detection and security.”

On stablecoin adoption, “close to 60% of the respondents reported they saw deposit erosion and reduced lending capacity, and uneven regulatory implementation or regulatory arbitrage, as the “most impactful” or “moderately impactful” to their banks.”