Ranks of Money-Losing Banks Swelled by 6% in First Quarter

The states with the largest percentage of unprofitable banks in the first quarter were Idaho, Nevada, Hawaii, North Carolina, Arizona, California, and Florida.

Only four states-Alaska, Maine, Rhode Island, and Vermont-had no money- losing banks during the period, according to a new study by Veribanc, the bank-tracking firm in Wakefield, Mass.

Just 414 of 9,588 commercial and savings banks reported a loss in the first quarter.

That's up 6% from the fourth quarter of 1997.

Of the money-losers, about 150 are new banks that have yet to turn a profit, Veribanc found. Merger costs pushed other banks into the red.

The others, Veribanc said, are struggling with isolated problems rather than regional economic difficulties.

"Five percent of them just aren't joining in on the party," said Warren Heller, who heads Veribanc.

"There's no underlying economic groundswell here."

Mr. Heller said he expects more banks in the Pacific Northwest and the Grain Belt-regional economies that rely heavily on exports to Asia-to post losses as the year continues.

Bruce A. Koppe, executive vice president of the Washington Bankers Association, said banks in his state are keeping a close eye on the Asian economic situation and the impact it may have on the banks' customers.

"The consensus would be that this certainly is a stressful time," he said. "But it's still too early to tell what the effect will be."

Mr. Koppe said agricultural banks may feel the pinch later this year, after Washington farmers harvest their wheat and apple crops.

Prices for both commodities have been down because of the Asian economic crisis, and farmers may have trouble paying off their loans.

Many banks are preparing for an Asia-related downturn. Grundy National Bank of Grundy Center, Iowa, is estimating farm land collateral at below- market costs so the $102 million-asset bank will be protected if farmers default, said Kevin J. Swalley, Grundy's president.

Except for banks with indirect ties to the Asian economy, Mr. Heller said, the earnings outlook is bright for banks.

"Unless we have a general economic downturn, things should be fine," he said.

"I don't think we'll feel the excesses of the recent economy until consumers can't repay their loans."

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