Abound Resources Survey Reveals That Regulations, Rates and Economic Recovery Dampen Optimism at Community Banks

Jan 9 - According to Abound Resources’ recent survey of community bank executives, CEOs of community banks are much more pessimistic going into 2013 than they were going into 2012. The primary driver of the pessimism is an increasingly difficult regulatory environment. 

In 2012, despite uncertainty about the economy and regulations, CEOs felt they could plan for the impact of regulations. However, going into 2013 they are concerned about increasing regulations, uncontrolled powers of the Consumer Financial Protection Bureau and increasing inconsistency among bank examiners.

“This year CEOs are decidedly more pessimistic than they have been since we launched our annual survey four years ago,” said Brad Smith, president and CEO of Abound Resources. More than one-third (36 percent) of bank CEOs report they are either very or somewhat pessimistic about their banks' outlook for 2013. In 2012, only 21 percent were pessimistic and none were very pessimistic. Only about one-quarter (28 percent) are optimistic or very optimistic about 2013, compared to 45 percent in 2012.

Other major issues of concern are a weak economy and loan demand. Both of these factors were mentioned by 67 percent of CEOs as major concerns in 2013.

In terms of setting growth priorities for 2013, growing commercial loans, growing mortgages and mortgage originations and increasing market share among the small business segment were the top three.

On the operating side of the equation, priorities are consistent with prior year surveys in that streamlining work flows and increasing operational and technology efficiencies are the primary focus. 

It appears 2013 is the year of workflow improvements. In 2012, streamlining workflows was cited by 45 percent of CEOs as a priority, second to improving efficiency ratios and becoming more efficient (64 percent). This year, workflow is the number one efficiency and cost saving priority for CEOs (60 percent), followed closely by improving the efficiency ratio (58 percent).

According to Smith, “There is a built-up demand for improving workflow since so few banks made workflow improvements last year. Workflow improvement projects are tricky as middle management is often resistant to changing how they work, or they don’t know how to make changes beyond a few tweaks.”

A complimentary copy of a white paper analyzing the complete survey results is available for download at www.AboundResources.com.