The Impact of Loan Restructuring on Commercial Bank Financial Statements

In order to survive instability in the financial institution industry and grow in the 1990s, bankers must be innovative and generate new alternatives to resolve their problem loans. Restructuring is a viable alternative in resolving problem loans and reducing the negative effects that accompany loan...

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Bibliographic Details
Published in:The Journal of bank accounting & auditing 1992-04, Vol.5 (3), p.11
Main Authors: Agapos, A M, Agapos, Catherine E
Format: Article
Language:English
Subjects:
Accounting
Advantages
Balance sheets
Bank management
Bank reserves
Capital assets
Commercial banks
Debt restructuring
Fair market value
Financial statements
Impacts
Income taxes
Loan losses
Loans
Loss reserves
Methods
Net income
Profit margins
Profitability
Ratios
Refinancing
Valuation
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Summary:In order to survive instability in the financial institution industry and grow in the 1990s, bankers must be innovative and generate new alternatives to resolve their problem loans. Restructuring is a viable alternative in resolving problem loans and reducing the negative effects that accompany loan write-offs. Restructuring can delay and often alleviate many capital and financial problems that come under the close scrutiny of Federal Deposit Insurance Corp. examination and regulation. Loans can be restructured by modifying the original loan terms and by adjusting the valuation of the borrower's assets. Loan restructuring will have direct effects on the net interest margin and will also change gross profit margin, net profit margin, return on equity, and return on assets. Loan restructuring reduces loan losses and allows the bank to improve its asset quality and profitability ratios.
ISSN:0895-853X