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Community banks in the Northeast are the most pessimistic about the economy of anywhere in the nation, according to a new survey.

Based on the fourth quarter 2023 Community Bank Sentiment Index (CBSI) released by the Conference of State Bank Supervisors (CSBS), the sentiment of community bankers in the Northeast translated to 83 points, a 15-point increase from the 68-point reading last quarter, but still below 100 points that represents a neutral view of the economy.

Among all the regions of the United States, Northeast-based bankers are the most pessimistic compared to the other four regions where the CSBS index read between 90 and 94 points. Overall, community banks in the whole country recorded 92 points on the CSBS index, which is higher than 86 points a quarter ago.

Northeast-based bankers shared that their view of monetary policy and business conditions improved, as the Federal Reserve hinted that it is done raising its benchmark interest rate and may cut rates three times this year.

But they maintain a negative attitude toward regulatory burdens and profitability as banks still face margin pressures on all sides: dwindling deposits, slower lending on high-interest rates and new regulations that can be costly to implement.

“While it is encouraging to see the CBSI improve even slightly, rapidly rising interest rates that started in early 2022—while necessary to combat rising inflationary pressures—have stressed net interest margins, liquidity, securities valuations, loan demand, and credit quality,” CSBS Chief Economist Tom Siems said in a statement.

The survey noted that fewer community bankers (81 percent) believe the U.S. economy is at the start of, or already in, a recession. The percentage is down from 87 percent last quarter.