Overall, the U.S. banking industry appears well positioned to withstand a period of economic adversity and continue to provide credit to finance the economic recovery. This article discusses a combination of factors that may affect some banks-particularly those that rely on rapid loan or new account growth or that exhibit heightened credit risk profiles-in this more challenging economic environment. The article also identifies weaknesses that may exist in some previously booming metro areas as the local economies continue to slow.

Boston--The Region's insured institutions report healthy conditions. However, net interest margin compression and the potential for rising interest rate risk during a slowing economy could pressure earnings.

Chicago--Modest declines in credit quality have become more widespread among insured institutions. Continued slowing of economic conditions and ramifications from the September 11, 2001, attacks could lead to further weakening.

Kansas City--Farm banks in counties with relatively high reliance on government agriculture payments have exhibited higher levels of credit risk and are more vulnerable to any changes in these support programs.

Memphis--Credit quality, already showing some deterioration because of the Region's prolonged weak economic conditions, could decline further should the national economy continue to slow.

New York--Heightened economic uncertainty following September 11 has placed additional pressure on bank earnings and credit quality. However, the Region's insured institutions appear better positioned for an economic downturn than in the early 1990s.