their profit levels were slightly lower than those for larger community banks prior to the crisis, but they performed similarly until 2015, when banks of this size showed a decline in profits not experienced by any other size grouping of community banks. time will tell whether this is an anomaly or the beginning of a pattern. - 6looking at the smallest community banks, those with less than $ 100 million in assets, gives some hints for why their numbers have declined. the average roa for the smallest banks ( in purple, with circles ) has been consistently lower than that for the nextsmallest class of banks since 1995. the already lower level of profits for the smallest banks began to decline further in 2006. since 2009, profits for the smallest banks have increased slightly but remain below their levels of profitability prior to the recession and below the roa levels for larger banks. 5 data on nonperforming loans ( npls ) show a mixed picture. 6 a breakdown of community banks by size indicates that the ratio of npls to total loans peaked for every size category in 2010 ( figure 8 ). prior to 2007, the smallest community banks consistently had a higher ratio of npls than did larger community banks ; but from 2007 until 2013, their npl rate was below that of larger community banks. in the past two years, npls on the balance sheets of the smallest banks have declined more slowly than for larger banks so that banks with less than $ 100 million in assets once again have the highest npl ratio. let me turn now to consider changes in the number of community banks over the past 20 years at a more local level. for purposes of this discussion, i define local banking markets as counties in rural areas and as metropolitan statistical areas in urban areas. the patterns for return on equity ( roe ) are similar to those for roa, although community banks as a whole had negative roe in both 2009 and 2010. the largest community banks, with $ 1 billion to $ 10 billion in assets, suffered much greater negative returns on equity in these years than did smaller community banks. midsize community banks, with $ 300 million to $ 1 billion in assets, fared better than their larger and smaller counterparts. the smallest community banks showed an unusual pattern in their roes. ( it should be noted that, for banks of this size, roe can be a questionable measure of profitability because such banks tend to be either privately held or very thinly traded. ) these banks were in

ben s bernanke : semiannual monetary policy report to the congress testimony of mr ben s bernanke, chairman of the board of governors of the us federal reserve system, before the committee on financial services, us house of representatives, washington dc, 18 july 2007. * * * chairman frank, ranking member bachus, and members of the committee, i am pleased to present the federal reserve ’ s monetary policy report to the congress. monetary policy report to the congress. as you know, this occasion marks the thirtieth year of semiannual testimony on the economy and monetary policy by the federal reserve. in establishing these hearings, the congress proved prescient in anticipating the worldwide trend toward greater transparency and accountability of central banks in the making of monetary policy. over the years, these testimonies and the associated reports have proved an invaluable vehicle for the federal reserve ’ s communication with the public about monetary policy, even as they have served to enhance the federal reserve ’ s accountability for achieving the dual objectives of maximum employment and price stability set for it by the congress. i take this opportunity to reiterate the federal reserve ’ s strong support of the dual mandate ; in pursuing maximum employment and price stability, monetary policy makes its greatest possible contribution to the general economic welfare. let me now review the current economic situation and the outlook, beginning with developments in the real economy and the situation regarding inflation before turning to monetary policy. i will conclude with comments on issues related to lending to households and consumer protection - topics not normally addressed in monetary policy testimony but, in light of recent developments, deserving of our attention today. after having run at an above - trend rate earlier in the current economic recovery, u. s. economic growth has proceeded during the past year at a pace more consistent with sustainable expansion. despite the downshift in growth, the demand for labor has remained solid, with more than 850, 000 jobs having been added to payrolls thus far in 2007 and the unemployment rate having remained at 4 - 1 / 2 percent. the combination of moderate gains in output and solid advances in employment implies that recent increases in labor productivity have been modest by the standards of the past decade. the cooling of productivity growth in recent quarters is likely the result of cyclical or other temporary factors, but the underlying pace of productivity gains may also have slowed somewhat. to a considerable degree, the slower pace of economic growth in recent quarters reflects the ongoing adjustment in the housing