Authored FRBSF Economic Letter titled "Small California Banks Holding On"

Laderman compares the profitability (return on average assets, ROAA) data on small and medium-sized banks in California for the past ten years. She notes that, at first glance, the performance of small California banks appears to be seriously lagging the performance of medium-sized California banks and small banks in the country as a whole. However, once the relatively high rate of new bank formation in California, itself an auspicious sign, is taken into account, the picture looks more favorable. In addition, in 1999, earnings among small California banks continued to improve, while profitability of medium-sized banks and small banks elsewhere in the U.S. leveled off. These and other factors, such as differing rates of asset quality improvement, help explain why the profit rates of small banks were lagging and are now catching up to those of medium-sized banks.

Economic letter available at: http://www.frbsf.org/econrsrch/wklyltr/2000/el2000-14.html starting today.

Reporters who are doing articles on the state of the banking industry in California, or who are trying to interpret ROAA for CaliforniaÌs small and medium-sized banks, may garner neutral third party perspective by referring to her economic letter and contacting Laderman directly at (415) 974-3171, between 9:45 a.m. and 3:50 p.m., Monday through Friday.