Liquidity Status in the Community Banking Industry: October 2025

Community banks across the United States are navigating a shifting liquidity landscape in 2025, marked by both resilience and emerging vulnerabilities. Here’s a snapshot of the current liquidity environment: 

Rising Liquidity Risk 

Liquidity risk is on the rise, particularly among banks with less than $10 billion in assets. This trend is driven by: 

• Accelerated loan growth. 
• Declining levels of liquid assets. 
• Increased dependence on non-core and wholesale funding sources, which can be less stable during periods of stress. 

Deposit Competition Intensifies 

Core deposit growth has slowed significantly, making deposit competition one of the top external risks for community banks. This challenge is second only to pressures on net interest margins, according to the 2025 CSBS Annual Survey. 

Emphasis on Contingency Planning 

To manage liquidity stress, banks are increasingly relying on: 

• Contingency Funding Plans (CFPs). 
• Detailed cash flow projections. 

These tools are essential for maintaining adequate liquidity cushions and preparing for potential funding disruptions. 

Regulatory Tailoring in Focus 

At the Federal Reserve’s October 2025 Community Bank Conference, regulators and industry leaders emphasized the importance of tailoring capital and liquidity standards to better reflect the unique profiles of community banks. The goal is to strike a balance between regulatory oversight and operational flexibility. 

Strategic Adjustments Underway 

Despite the challenges, community bankers remain cautiously optimistic. Many are adapting their strategies to: 

• Improve liquidity through operational efficiencies. 
• Leverage technology to enhance deposit gathering. 
• Navigate inflation-related cost pressures. 

In summary, while community banks are showing resilience, they must remain vigilant and proactive in managing liquidity amid a dynamic economic and regulatory environment. 

Next Steps

Curious about how your bank can stay ahead in today’s liquidity environment? Reach out to your Correspondent Banker—they’re ready to help you explore and fine-tune your liquidity options so they truly support your organization’s goals.