THIBODAUX – Faculty researchers from the College of Business Administration at Nicholls State University have issued their first annual technical report titled “Louisiana Community Banks: An Analysis of Recent Performance.”
The report presents the results of an analysis of Louisiana community banks with total assets of $1 billion or less – providing readers with a clear picture of the recent trends in the banks’ performance as well as their current condition relative to the national average for banks of similar size. All banks were analyzed in terms of profitability, capital risk, credit risk, utilization and liquidity. The time frame for the benchmark study is 2005 to 2008. The 2009 report is expected to be completed within the next 60 days.
Given that certain banks exhibit different business patterns and sensitivities relative to their local communities, the analysis is divided into three groups based on asset size: Group 1, less than or equal to $100 million; Group 2, greater than $100 million and less than or equal to $500 million; and Group 3, greater than $500 million and less than or equal to $1 billion. The main findings of the analysis follow:
- As of the report’s writing, one Louisiana community bank has failed. On March 12, 2009, for the first time since 2002, the FDIC shut down a Louisiana bank – a Group 2 institution with approximately $243 million in assets. The failed bank was purchased by a competitor who assumed all of the failed bank’s deposits, which means the bank failure amounted to nothing more than a transition from one bank to another for depositors.
- A few of the smallest Louisiana community banks experienced a drop in profitability in 2008. As a group, however, they appear to have remained profitable through 2008 and have outperformed the average for their national peers.
- On average, the Group 1 banks have increased their equity positions and/or reduced their risky assets as of the end of 2008. By the end of 2008, Louisiana community banks in Group 1 had surpassed the average equity capital position of their national peers.
- A few of the mid-sized Louisiana community banks experienced a drop in profitability in 2008. However, as a group, these banks appear to have remained profitable through 2008.
- On average, the banks in Group 2 have increased their equity positions and/or reduced their risky assets as of the end of 2008.
- Problems with nonperforming loans for the Group 2 banks appear to be isolated within a small number of banks.
- The largest Louisiana community banks remained profitable through 2008 with even less volatility than exhibited by the Group 1 and Group 2 banks.
- On average, the Group 3 banks have increased their equity positions and/or reduced their risky assets as of the end of 2008.
- Relative to the national peer group, most Louisiana community banks appear to have maintained adequate credit standards.
The report’s authors include Dr. Ronnie Fanguy, associate professor of computer information systems; Dr. John Lajaunie, professor of finance; Dr. Shari Lawrence, assistant professor of finance; and Dr. Norbert Michel, assistant professor of business administration.
To read the full report, go to https://www.nicholls.edu/business/technical-report-on-la-community-banks/ and click the link at the bottom of the page, titled “Nicholls Technical Report on LA Community Banks(pdf).”