Net earnings at community banks have increased, on average, 8% per year since 1992-almost three times the growth rate of community banks during the 1980s. Higher profits, in part, were bolstered by lower efficiency ratios.

But Hovde Financial Inc. concluded in a report released last month that only 10% to 15% of the community banks with assets of $100 million to $3 billion will continue to generate significant earnings growth. The rest of the roughly 3,000 banks in that asset range will grow far more slowly over the next three years, the Washington investment banking firm predicted.

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