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Noninterest Income and Financial Performance at U.S. Commercial Banks


  • Robert DeYoung
  • Tara Rice


Noninterest income now accounts for over 40% of operating income in the U.S. commercial banking industry. This paper demonstrates a number of empirical links between bank noninterest income, business strategies, market conditions, technological change, and financial performance between 1989 and 2001. The results indicate that well-managed banks expand more slowly into noninterest activities, and that marginal increases in noninterest income are associated with poorer risk-return tradeoffs on average. These findings suggest that noninterest income is coexisting with, rather than replacing, interest income from the intermediation activities that remain banks' core financial services function. Copyright 2004 by the Eastern Finance Association.

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  • Robert DeYoung & Tara Rice, 2004. "Noninterest Income and Financial Performance at U.S. Commercial Banks," The Financial Review, Eastern Finance Association, vol. 39(1), pages 101-127, February.
  • Handle: RePEc:bla:finrev:v:39:y:2004:i:1:p:101-127

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    References listed on IDEAS

    1. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters,in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
    2. Gilley, Otis W. & Leone, Robert P., 1991. "A two-stage imputation procedure for item nonresponse in surveys," Journal of Business Research, Elsevier, vol. 22(4), pages 281-291, June.
    3. Boldin, Robert J. & Leggett, Keith & Strand, Robert, 1998. "Credit union industry structure: an examination of potential risks," Financial Services Review, Elsevier, vol. 7(3), pages 207-215.
    4. Karels, Gordon V. & McClatchey, Christine A., 1999. "Deposit insurance and risk-taking behavior in the credit union industry," Journal of Banking & Finance, Elsevier, vol. 23(1), pages 105-134, January.
    5. Fried, Harold O. & Knox Lovell, C. A. & Eeckaut, Philippe Vanden, 1993. "Evaluating the performance of US credit unions," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 251-265, April.
    6. Aruna Srinivasan & B. Frank King, 1998. "Credit union issues," Economic Review, Federal Reserve Bank of Atlanta, issue Q 3, pages 32-41.
    7. Keith Leggett & Yvonne Stewart, 1999. "Multiple common bond credit unions and the allocation of benefits," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 23(3), pages 235-245, September.
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