Journal Article

A return to profitability: the performance of eleventh district commercial banks

Abstract: In 1990, the commercial banking industry in the Eleventh Federal Reserve District posted profits for the first time in five years. Kevin Yeats examines this turnaround and concludes that banks returned to profitability for three reasons: the Federal Deposit Insurance Corporation (FDIC) took over many bad loans as it resolved failed banks, banks lowered their burden from nonperforming loans by realizing losses and removing bad loans from the books, and improvement in the regional economy enabled some borrowers to catch up on delinquent payments. Yeats predicts that if delinquencies continue to decline and net income remains positive at Eleventh District banks, the region's banking industry can proceed to full financial recovery. ; Yeats notes that from late 1987 through 1990 the general improvement in the Southwest economy was not reflected in the performance of this region's banks. To reach that conclusion, Yeats examines the performance of banks that received no FDIC assistance during this time and finds that their improved capital ratios followed the region's economic upswing with a lag of at least three years.

Keywords: Federal Reserve District, 11th; Bank profits;

Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Economic and Financial Policy Review

Publication Date: 1991

Issue: Jul

Pages: 15-29