Too many minority-owned banks and thrifts badly underperform a cross-section of small nonminority institutions, according to a study by the Federal Deposit Insurance Corp.

Critics of the study, which looked at the performance of minority-run banks and thrifts as a group for the first time since the mid-1970s, say that the analysis itself is flawed, and that competition from big banks has forced an erosion of credit quality. The research found that a disproportionately large number of minority-run banks and thrifts have more nonperforming assets, a lower return on assets, "significantly less" noninterest income, and less favorable efficiency ratios than the average bank or thrift with assets of $1 billion or less. Donald Inscoe, associate director of the agency's statistics branch, said these weaknesses undermine the services offered by minority-owned banks and thrifts, which together hold $67.8 billion of assets and for the most part do business in inner-city neighborhoods.

Their managers should focus on improving asset quality and efficiency, Mr. Inscoe said in a speech at a meeting here of the National Bankers Association and the American League of Financial Institutions, trade associations that represent minority-owned banks and thrifts.

The FDIC research found that most minority-owned banks and thrifts perform as well as or better than other depository institutions with $1 billion or less of assets, but that a large group fell far below the norm. For instance, all banks of that size averaged 1.31% return on assets, but 64 of the nation's 158 minority institutions did half that well or less.

In addition, a disproportionate five of the 13 banks that have failed since 1997 were minority-owned. The average efficiency ratio of minority-owned commercial lenders - a group that included 99 of the 158 banks and thrifts the FDIC surveyed - was 61.25%. For the industry as a whole efficiency averages 57.23%.

Glen Canner, a Federal Reserve Board researcher of minority-owned banks and thrifts, said deeper analysis is needed. He suggested measuring minority-owned banks and thrifts against those of similar size in their markets. Most minority-run banks have assets of less than $100 million.

Helen Coleman, the president and chief executive officer of Home Federal Savings Bank in Detroit, dismissed the FDIC's conclusions. "Their research does not faze me in the least, because you can't put us all in the same basket," said Ms. Coleman, who is also on the board of the American League of Financial Institutions.

Manuel A. Casanova Jr., executive vice president at International Bank of Commerce in Brownsville, Tex., said the FDIC is missing the bigger picture.

"When you have a return on assets of 0.5% or 0.6% the regulators say you are not run well - because regulators are technocrats," he said. "But minority bankers feel they have an obligation to help the minority community, and it costs them a lot of money to do that."

Because most minority-owned banks are on cities, they tend to pay more for staff and offices, Mr. Casanova said. In addition many depositors maintain small accounts that they use often, increasing costs.

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