This year, banks--especially community banks--have been aided by low interest rates and the accumulation of core deposits, together with more recent and modest resurgence in loan demand. Efforts to improve earnings on equity have also resulted in differences according to bank size. The largest banks have most aggressively worked to improve their efficiency ratios and expand their sources of non-interest revenue.
Not surprisingly, these banks have experienced the most improvement in their returns on equity. The smaller banks have had a much more stable return on equity--at relatively high levels, I might add. A close examination of community bank performance reveals a wide range of efficiency ratios among traditional community banks, some of which have efficiency ratios under 50 percent.