Allied Academies International Conference Academy of Commercial Banking and Finance

The U.S. economy is in the recovery stage from a recession that apparently began in March 2001 and probably ended in the first half of 2002. Banks have remained very profitable over this recession and recovery period. However, there has been concern expressed that declining credit quality might become a problem. This paper is an empirical analysis of the performance, credit quality and loan growth of banks located in the seven South-Central U.S. states, of Arkansas, Louisiana, Mississippi, Oklahoma, New Mexico, Tennessee and Texas. We used FDIC data, which we received from Stratis Technologies, of Louisville, Kentucky, to analyze performance ratios such as the Return on Assets and the Return on Equity which were then compared to the average for all U.S. banks. Non-performing loans and loan charge offs for these states were compared to the national average. Finally, the average loan growth rates for these states were then compared to the average loan growth of all U.S. banks. Preliminary analysis of the performance, credit quality and loan growth of the banks in these seven South-Central states, shows that they compare favorably with the national averages in all the above areas. In fact in the credit quality and loan growth categories the majority these seven banks consistently exceeded the national averages. ABSTRACT The three-year period beginning in December 2000 saw historic declines in the interest rates in most financial markets including 15 reductions in the key rates established by the Federal Reserve. However, interest rates in the credit-card industry gave mixed signals with some rates remaining "sticky" or inelastic. While other studies have identified the mathematical relationships between credit-card interest rates and the discount rate, federal funds rate, and prime rate, this study looks at both the "introductory rates" charged by credit-card providers as well as the "ongoing rates" following the introductory period. It also focuses solely on the rates contained in the mailed advertising materials sent by national credit-card marketers. The evidence shows that "introductory rates" have declined at approximately the same rate as other interest-rate markets. However, the "ongoing rates" have been inde-pendent of other rate declines and, in fact, have increased during the three-year period. ABSTRACT This paper seeks to enhance the understanding of the ratio adjustment phenomenon by investigating the association between certain firm-specific factors and the rates of ratio adjustment (ë) and of expectation (target) adjustment (ä). The firm-specific factors considered here are supported by agency arguments and have been used in prior research dealing with the earnings effects of accounting choice. The hypothesized relationships between the firm-specific factors and ratio adjustment were tested on a random sample of U.S. corporations over an 18-year period ending in 1988. ABSTRACT A two-stage regression procedure was employed in this study, which seeks to enhance the understanding of expectations (targets) adjustment and of the ratio adjustment phenomenon by investigating the association between certain firm-specific factors and the ratio adjustment. In stage one, the Marquardt nonlinear regression procedure was used to estimate the components of ratio and expectation adjustment (ë and ä) for each firm across the 18-year period for each of the seven financial ratios tested. A partial adjustment adaptive expectations model was employed in stage one. In stage two, stage one results (ë and ä) were regressed on four firm-specific variables (size, market share, beta, and debt/equity) to assess the association between firm-specific factors and the two components of ratio adjustment (ë--the speed of adjustment to the target, and ä--the speed with which managers adjust their expectations regarding stability of the target measure). Initially, the industry mean was chosen to proxy for the target measure. ABSTRACT One important recent trend in bank structure has been increasing utilization of standby letters of credit, loan sales, and other securitized instruments. Previous attempts to explain this growth can be separated into two distinct approaches: Theories which attempt to explain what incentives exist for banks to securitize and theories which attempt to explain the incentives for borrowers to select securitize debt. The bank incentive theories provide testable implications about how banks which securitize should differ in structure from those which do not. Borrower incentive theories may be tested by examining the relative riskiness (quality) of borrowers who securitize their debt and those who use traditional debt financing. This research presents empirical evidence on these theories utilizing data on standby letters of credit (SLCs). Results from analysis of bank financial statement data fail to verify the implications of either the regulatory costs hypothesis of Baer and Pavel (1988) or the collateralization hypothesis of Benveniste and Berger (1986). Tests using bond rating data on municipalities tends to support the empirical implications of the Greenbaum and Thakor (1987) model as well as implications of the collateralization hypothesis derived by James (1988).