Cornerstone Community Bank reported positive earnings for the second consecutive quarter of 2011 and industry insiders said that most local banks haven’t been hurt badly by the recent recession.  

“In the Tennessee area, community banks have fared reasonably well during the financial crisis,” Executive Vice President and Chief Economist with the Independent Community Bankers of America Paul Merski said. “They have an advantage. They known their customers. They know how to judge the credit worthiness of their business and local customers.”

Cornerstone officials Wednesday reported an 8.6 percent increase in income, compared with the first six months of 2010.

The bank also fully funded its loan loss provision at the beginning of the year and has not been required to make any material provision to loan loss allowance during 2011.


Officials also reported decreased operating expense, which allowed Cornerstone to offset reduced loan income compared to 2010.

“The Bank is definitely moving in the right direction,” Cornerstone President Frank Hughes said in a prepared statement. “I am extremely pleased with the progress we have achieved in strengthening the bank’s capital position and improving asset quality, which will help us progress to a more conservative banking model and a higher return for investors.”

Cornerstone’s nonperforming loans also decreased.

On June 30, 2011 the bank’s non-performing loans were about $7.2 million or 2.68 percent of total loans, compared to about $13 million or 4.09 percent the same day in 2010.

A non-performing loan means that the borrower isn’t keeping the loan payments current, and if a bank has a large amount of non-performing loans, it makes them more reluctant to give more loans. 

Another community bank, FSG, is scheduled to release its earnings report August 16, President and COO Gene Coffman said in an email.

At the end of April, FSG announced that Coffman would take over the bank.

At that time, FSG had not made money in the last nine quarters – not reporting a profit since the third quarter of 2008.

But area FSG customer Owen Seaton said he gets great service from the bank and isn’t worried about its financial situation. 

“I think their issues are behind them,” he said via Twitter. “I feel it is important to have banking ties to the city.”

Merski said the financial success of some community banks depends on the focus of the bank’s portfolio.

“Banks with a more diversified portfolio have been faring very well,” he said.