Table 6.
Total Nonperforming Assets Prediction (one year ahead)
Ordinary Least Squares Regression
FDIC Survey Data 1996-1998
| |
Specification 1 |
Specification 2 |
Specification 3 |
Specification 4 |
| Explanatory Variable |
Coefficient Estimate |
(standard error) |
Coefficient Estimate |
(standard error) |
Coefficient Estimate |
(standard error) |
Coefficient Estimate |
(standard error) |
| Intercept |
0.1655 *** |
(0.3024) |
0.5447 *** |
(0.3201) |
0.8840 *** |
(0.3373) |
0.7424 *** |
(0.3181) |
| Nonperforming assets (t-1) |
0.6842 *** |
(0.0145) |
0.65516 *** |
(0.0151) |
0.63065 *** |
(0.0160) |
0.6341 *** |
(0.0160) |
| Equity (t-1) |
0.0091 * |
(0.0043) |
0.0100 * |
(0.0043) |
0.0110 ** |
(0.0043) |
0.0109 ** |
(0.0043) |
| Allowance for loan losses (t-1) |
0.0000 ** |
0.0000 |
0.0000 |
0.0000 |
0.0000 |
0.0000 |
0.0000 * |
0.0000 |
| Volatile liabilities (t-1) |
-0.0003 *** |
(0.0024) |
-0.0004 *** |
(0.0023) |
-0.0008 *** |
(0.0023) |
-0.0006 *** |
(0.0023) |
| Liquid assets (t-1) |
-0.0027 |
(0.0027) |
-0.0035 |
(0.0027) |
-0.0033 |
(0.0027) |
-0.0026 |
(0.0027) |
| Loans and securities with
maturities of 5 years or more (t-1) |
0.0037 |
(0.0029) |
0.0025 |
(0.0029) |
0.0026 |
(0.0029) |
0.0035 |
(0.0029) |
| Gross charge-offs on loans & leases (t-1) |
-0.1791 ** |
(0.0904) |
-0.2326 *** |
(0.0903) |
-0.2541 *** |
(0.0904) |
-0.2264 ** |
(0.0901) |
| Provisions for loan & lease losses (t-1) |
0.3507 *** |
(0.0931) |
0.3591 *** |
(0.0929) |
0.3629 *** |
(0.0933) |
0.3503 *** |
(0.0932) |
| Income before taxes and
extraordinary items (t-1) |
0.0402 * |
(0.0214) |
0.0471 ** |
(0.0214) |
0.0589 ** |
(0.0215) |
0.0607 *** |
(0.0214) |
| State personal-income growth, lag 1 |
-0.0316 * |
(0.0154) |
-0.0287 * |
(0.0153) |
-0.0286 * |
(0.0153) |
-0.0301 ** |
(0.0153) |
| State personal-income growth, lag 2 |
0.0019 |
(0.0173) |
0.0014 |
(0.0173) |
0.0002 |
(0.0172) |
0.0013 |
(0.0172) |
| State personal-income growth, lag 3 |
0.0101 |
(0.0213) |
0.0067 |
(0.0212) |
0.00727 |
(0.0211) |
0.0076 |
(0.0211) |
| State personal-income growth, lag 4 |
0.0056 |
(0.0158) |
0.0032 |
(0.0158) |
0.0056 |
(0.0157) |
0.0073 |
(0.0157) |
| State personal-income growth, lag 5 |
0.0266 * |
(0.0143) |
0.0268 * |
(0.0143) |
0.0290 ** |
(0.0143) |
0.0304 ** |
(0.0142) |
| Asset component dummy 1 |
|
|
|
|
-0.4775 *** |
(0.1328) |
-0.6382 *** |
(0.1170) |
| Asset component dummy 2 |
|
|
|
|
-0.2608 ** |
(0.1125) |
-0.3422 *** |
(0.1130) |
| Survey lag (calldate - survey date) |
|
|
0.0000 |
(0.0002) |
0.0000 |
(0.0002) |
|
|
| Concentrations of credit dummy 1 |
|
|
-0.1140 * |
(0.0630) |
-0.1016 |
(0.0628) |
|
|
| Concentrations of credit dummy 3 |
|
|
0.0007 |
(0.0969) |
-0.0058 |
(0.0966) |
|
|
| Fail-to-adjust pricing dummy 1 |
|
|
-0.0294 |
(0.0509) |
-0.0235 |
(0.0508) |
|
|
| Fail-to-adjust pricing dummy 3 |
|
|
-0.1197 |
(0.1054) |
-0.1110 |
(0.1052) |
|
|
| Principal reduction dummy 1 |
|
|
-0.0748 |
(0.0475) |
-0.0542 |
(0.0476) |
|
|
| Principal reduction dummy 3 |
|
|
0.3781 *** |
(0.1060) |
0.3689 *** |
(0.1058) |
|
|
| Written policies versus practices dummy 1 |
|
|
-0.0139 |
(0.0555) |
-0.0035 |
(0.0554) |
|
|
| Written policies versus practices dummy 3 |
|
|
0.1829 |
(0.1243) |
0.1345 |
(0.1245) |
|
|
| Current underwriting practices dummy 1 |
|
|
0.0248 |
(0.0688) |
0.0187 |
(0.0685) |
|
|
| Current underwriting practices dummy 3 |
|
|
-0.0764 |
(0.1039) |
-0.0836 |
(0.1035) |
|
|
| Portfolio credit risk dummy 1 |
|
|
-0.1431 ** |
(0.0640) |
-0.0919 |
(0.0650) |
|
|
| Portfolio credit risk dummy 3 |
|
|
0.1604 * |
(0.0962) |
0.0895 |
(0.0983) |
|
|
| Loan administration dummy 1 |
|
|
-0.0838 |
(0.0581) |
-0.0726 |
(0.0579) |
|
|
| Loan administration dummy 3 |
|
|
-0.0851 |
(0.0885) |
-0.1405 |
(0.0891) |
|
|
| Adjusted R Squared |
56.0% |
|
56.9% |
|
57.3% |
|
56.9% |
|
| F Statistic for test that all variables are significant, 5 percent critical value |
214.29
1.67 |
|
108.07
1.46 |
|
102.61
1.46 |
|
194.8
1.67 |
|
| Specifications compared for F-statistic test that all survey terms are not significant, 5 percent critical value |
|
Spec(1) and (2)
4.47, 1.67 |
|
|
|
|
Spec(3) and (4)
2.40, 1.67 |
|
* indicates significance at 10% level, ** indicates signifcance at 5% level
and *** indicates significance at 1% level
