Local community banks this year have growth rates that would make other companies in any industry jealous.

This year is on pace to see record profits for The Citizens National Bank of Southwestern Ohio, based in Washington Twp., and Farmers & Merchants Bank, based in Miamisburg, said company presidents. LCNB Corp. of Lebanon also consistently reports profits each year, despite a recent economic recession and housing bust.

Citizens National’s net income for the first six months of this year is up 39 percent from the same time last year. For all of 2011, Citizens National had net income of approximately $657,000. At Farmers & Merchants, net income in 2010 and 2011 increased about 35 percent and 20 percent respectively from the years before to $762,000.

LCNB, in its second quarter earnings released last Wednesday, said continuing net income for the first half of 2012 was up almost 22 percent to approximately $4.3 million from the same time in 2011.

“We’ve had three record years in a row,” said Shon Myers, president and CEO of Farmers & Merchants.

Myers said that’s because consumers and businesses flocked to community banks in a flight to safety around 2008 as anti-sentiments with big banks grew and they looked to safer places to put their money than in a volatile stock market.

Community banks tend to be more conservative lenders—requiring more money down of 20 to 25 percent on mortgage loans. And the small banks lend to people they know, said Seb Melluzzo, president and chief executive of Citizens National. Melluzzo said his bank hardly ever loaned more than 80 percent worth of property values.

These practices helped avoid major losses from bad loans. That also meant when lending dried up at larger institutions, community banks were able to continue in recent years to lend.

“I don’t know of one community banker that made a subprime loan,” Melluzzo said. “We didn’t stop loaning to builders, we didn’t stop loaning on investment property. We were always very cautious about who we lent to in the first place.”

Now as the economy shows signs of improvement with home sales and construction up and unemployment down in the region, banks this year are seeing better loan demand. But all three of these banks told they Dayton Daily News seeking more borrowers.

“Even though I think it’s a little bit better (loan demand), it’s still not robust,” said Steve Foster, president of LCNB. “I just think there’s still a lack of confidence in borrowing. We just have to be willing to loan if they qualify.”

Ohio has 222 community banks, 45 percent of which made record profits last year, said Robert Palmer, president and chief executive of Community Bankers Association of Ohio. The main differences between a community bank and a regional, superregional or national bank is size and place of decision makers, Palmer said. A community bank’s money stays in the community where it operates and decisions are made locally, he said.

Community banks in the state have a consolidated $61 billion in assets, smaller than the assets of Fifth Third alone, the region’s largest bank by deposits with assets of $117 billion.

The biggest issues facing these small businesses are loan demand, government regulation and bank industry reputation, Palmer said.

“In many instances consumers are saving today versus spending,” he said. “I think consumers have got to get confident in the economy to the point where they’re willing to go out and make big purchases.”

Banking industry regulations are coming “fast and furious,” Palmer added. Low interest rates have also tightened a key bank revenue source—the interest rate spread, or generally the difference of interest collected on loans, minus interest paid on deposits, bank officials said.

Farmers had $106 million in assets in 2011 and net income of $762,000. Farmers & Merchants has branches in Miamisburg, Germantown and West Carrollton with 27 employees.

Citizens National has three branches in Washington Twp., Huber Heights and Miami Twp. with 25 employees and assets of about $114 million. Net income in 2011 was about $657,000 compared to $721,000 the year before. Commercial and consumer loan values on the books declined to $70.5 million in 2011 from nearly $75 million in 2010.

Net income so far this year is ahead of last, but figures won’t be released until July 25.

LCNB Corp. has 25 offices in Butler, Montgomery, Warren and other counties. It has more than 150 employees, according to the city of Lebanon.

Assets were up more than four percent in 2011 to nearly $800 million, according to LCNB. Net income for all of 2011 was $7.3 million, down from more than $9 million the year before. Loan values grew last year to $458 million from $452 million the year before.