Community Banks Continue to Perform in a Downward Market

By: Carey Richardson

As the economy teeters on the brink of recovery many wonder where, and when, a sound investment can be made. Will investments prove profitable during a recession? Is there a recession-proof industry out there? Is that industry well-capitalized? These are factors investors look for when considering investment opportunities, but does such an investment exist? Actually, it does.

Community banks continue to perform well, despite current economic conditions. According to the FDIC, industry earnings exceeded $100 billion for the first time in 2002, with net income rising to $105.4 billion in the fourth-quarter. Earnings continue to grow thanks to a yield curve that offsets credit losses, while aggressive lending and fee income remain stable sources of income growth. FDIC-insured institutions who lend to creditworthy businesses and consumers virtually eliminates fears that banks will fall prey to the recession, and with total nonperforming loans increasing by $1.3 billion in the second quarter the banking industry is well-positioned to weather the current storm.