While bankers remain positive overall about the economic outlook over the next year, there are growing fears about inflation and the impact of the recent spike in housing prices, according to new survey of bank executives by IntraFi^® Network^SM.

Seventy-one percent of bankers surveyed noted improved economic conditions at their institution during the second quarter during the past 12 months, an increase of nine percentage points from the first quarter survey. More than half said they expect at least moderate economic improvement at their institution over the next twelve months.

Still, bankers see potential problems on the horizon. Half of respondents at institutions with less than $1 billion of assets said the current state of the housing market, which has recently seen record high prices, poses a serious risk to the U.S. economy. Forty-one percent of such bankers also said recent price spikes in certain sectors are indicative that inflation is a real concern.

"Smaller community banks, which got hit hard when the housing bubble burst in 2008, are clearly keeping a close watch on the current jump in housing prices," said Mark Jacobsen, CEO and Cofounder of IntraFi Network. "These same banks are also increasingly concerned about inflationary pressures."

There are also some signs of skepticism that the Federal Reserve will be able or willing to deal with inflation. Among all bank executives surveyed, 38% said the Fed either lacks the necessary tools or will be limited by politics from adequately addressing inflation.

With cyberattacks on the rise, bank leaders are also understandably worried about ransomware attacks. Ninety-eight percent said that they are concerned about ransomware attacks at their banks. Of that total, more than half (53%) said they are very concerned.

Despite predictions that the COVID-19 pandemic would significantly change banks' branching strategies, 77% said they are planning to return to pre-pandemic branch strategy and operations. Ten percent said they would reduce some bank branches, while 16% said they are reducing branch hours and staff.

The report was conducted during July 1 to July 15, and incorporated the responses of CEOs, presidents and CFOs at 473 unique banks across the country.

Other Highlights

• Loan demand — Slightly more than half of bankers surveyed expect loan demand to moderately increase over the next twelve months, with an additional 3% predicting a significant increase

• Funding costs — One quarter of those surveyed projected their bank's funding costs to decrease in the 12 months ahead, while 25% anticipated an increase

• Deposit competition — Three in 10 predicted deposit competition would increase in the 12 months ahead, with 17% foreseeing a decrease and more than half expecting things to remain the same

• Access to capital — Twenty-two percent of respondents forecasted their bank's access to capital to improve in the next 12 months, with 73% expecting it to stay the same

To read the report in its entirety, please visit our new website.