Academic journal article Journal of Accountancy

Banking Industry Finances Remain Strong despite Earnings Decline

Academic journal article Journal of Accountancy

Banking Industry Finances Remain Strong despite Earnings Decline

Article excerpt

A Veribanc, Inc. analysis of Federal Reserve Board second quarter call report data for the nation's 11,768 commercial banks found their net income had declined 3.5%, from $11.4 billion in the first quarter to $11 billion. However, net income for the period was still 34.1% higher than the $8.2 billion recorded in the second quarter of 1992. The number of banks reporting losses rose 10.8% during the period, from 583 to 646, and the number reporting serious losses increased 26.3%, from 57 to 72. However, the number of undercapitalized banks declined 9.9%, from 101 to 91.

H. J. (Monday) Lowe, president and chief executive officer of the Bank of West Baton Rouge, Port Allen, Louisiana, said community banks are doing well. Unlike large urban banks, community banks have not lost significant "hot money" deposits to securities markets and mutual funds. Lowe, who considered his bank typical of most community banks, expected the spread between interest income received from loans and interest paid on deposits to remain stable over the next 12 to 18 months because "most of the adjustments we've had to make to our investment portfolios already have been made." He said, "In the last year, our spread has dropped only about 22 basis points, from 4. …

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