Table 7.
Total Nonperforming Assets Prediction (one year ahead)
Ordinary Least Squares Regression
FDIC Survey Data 1998-2001
| |
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 |
0.6817 *** |
(0.2174) |
0.8790 *** |
(0.2340) |
1.0790 *** |
(0.2415) |
1.1988 *** |
(0.2266) |
| Nonperforming assets (t-1) |
0.7318 *** |
(0.0118) |
0.6979 *** |
(0.0124) |
0.6748 *** |
(0.0130) |
0.68178 *** |
(0.0129) |
| Equity (t-1) |
0.0057 * |
(0.0034) |
0.0061 * |
(0.0034) |
0.0080 ** |
(0.0034) |
0.0086 ** |
(0.0034) |
| 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) |
0.0067 *** |
(0.0017) |
0.0068 *** |
(0.0017) |
0.0072 *** |
(0.0017) |
0.0068 *** |
(0.0017) |
| Liquid assets (t-1) |
-0.0085 *** |
(0.0019) |
-0.0087 *** |
(0.0019) |
-0.0085 *** |
(0.0019) |
-0.0080 *** |
(0.0019) |
| Loans and securities with
maturities of 5 years or more (t-1) |
0.0009 |
(0.0021) |
0.0004 |
(0.0020) |
0.0002 |
(0.0020) |
0.0005 |
(0.0020) |
| Gross charge-offs on loans & leases (t-1) |
0.1432 ** |
(0.0582) |
0.1466 ** |
(0.0579) |
0.1407 ** |
(0.0577) |
0.1342 ** |
(0.0576) |
| Provisions for loan & lease losses (t-1) |
-0.2156 *** |
(0.0590) |
-0.2419 *** |
(0.0588) |
-0.2422 *** |
(0.0585) |
-0.2329 *** |
(0.0585) |
| Income before taxes and
extraordinary items (t-1) |
-0.0086 |
(0.0166) |
-0.0071 |
(0.0166) |
0.0063 |
(0.0167) |
0.0157 |
(0.0166) |
| State personal-income growth, lag 1 |
-0.0748 *** |
(0.0109) |
-0.0689 *** |
(0.0108) |
-0.0698 *** |
(0.0108) |
-0.0766 *** |
(0.0107) |
| State personal-income growth, lag 2 |
-0.0181 * |
(0.0106) |
-0.0230 ** |
(0.0105) |
-0.0248 ** |
(0.0105) |
-0.0212 ** |
(0.0105) |
| State personal-income growth, lag 3 |
0.0249 * |
(0.0130) |
0.01952 |
(0.0129) |
0.0178 |
(0.0129) |
0.02341 * |
(0.0128) |
| State personal-income growth, lag 4 |
0.0197 * |
(0.0119) |
0.0215 * |
(0.0118) |
0.0210 * |
(0.0118) |
0.0207 * |
(0.0118) |
| State personal-income growth, lag 5 |
0.0374 ** |
(0.0133) |
0.0338 ** |
(0.0132) |
0.0327 ** |
(0.0132) |
0.0350 *** |
(0.0132) |
| Asset component dummy 1 |
|
|
|
|
-0.4322 *** |
(0.0916) |
-0.5727 *** |
(0.0767) |
| Asset component dummy 2 |
|
|
|
|
-0.2150 *** |
(0.0828) |
-0.3020 *** |
(0.0744) |
| Survey lag (calldate - survey date) |
|
|
0.0005 *** |
(0.0002) |
0.0006 *** |
(0.0002) |
|
|
| Concentrations of credit dummy 1 |
|
|
-0.0340 |
(0.0476) |
-0.0158 |
(0.0475) |
|
|
| Concentrations of credit dummy 3 |
|
|
-0.0026 |
(0.0741) |
0.0043 |
(0.0738) |
|
|
| Fail-to-adjust pricing dummy 1 |
|
|
0.0990 |
(0.0602) |
0.1056 * |
(0.0600) |
|
|
| Fail-to-adjust pricing dummy 3 |
|
|
-0.0611 |
(0.1278) |
-0.0513 |
(0.1273) |
|
|
| Principal reduction dummy 1 |
|
|
-0.1373 *** |
(0.0448) |
-0.1118 ** |
(0.0448) |
|
|
| Principal reduction dummy 3 |
|
|
-0.0158 |
(0.1153) |
-0.0347 |
(0.1151) |
|
|
| Written policies versus practices dummy 1 |
|
|
-0.1094 ** |
(0.0477) |
-0.0856 * |
(0.0477) |
|
|
| Written policies versus practices dummy 3 |
|
|
-0.0179 |
(0.1155) |
-0.0251 |
(0.1151) |
|
|
| Current underwriting practices dummy 1 |
|
|
0.0515 |
(0.0544) |
0.0549 |
(0.0543) |
|
|
| Current underwriting practices dummy 3 |
|
|
0.1319 |
(0.1547) |
0.1048 |
(0.1542) |
|
|
| Portfolio credit risk dummy 1 |
|
|
-0.0402 |
(0.0494) |
0.0407 |
(0.0512) |
|
|
| Portfolio credit risk dummy 3 |
|
|
0.2625 * |
(0.1407) |
0.1888 |
(0.1437) |
|
|
| Loan administration dummy 1 |
|
|
-0.1969 *** |
(0.0471) |
-0.1633 *** |
(0.0474) |
|
|
| Loan administration dummy 3 |
|
|
0.0301 |
(0.1142) |
0.0054 |
(0.1143) |
|
|
| Adjusted R Squared |
56.4% |
|
57.3% |
|
57.6% |
|
57.3% |
|
| F Statistic for test that all variables are significant, 5 percent critical value |
346.31
1.67 |
|
174.06
1.46 |
|
165.25
1.46 |
|
314.71
1.67 |
|
| Specifications compared for F-statistic test that all survey terms are not significant, 5 percent critical value |
|
Spec(1) and (2)
6.34, 1.67 |
|
|
|
|
Spec(3) and (4)
3.06, 1.67 |
|
* indicates significance at 10% level, ** indicates signifcance at 5% level
and *** indicates significance at 1% level
