Profitability remains a challenge for banks and thrifts with less than​ $2 billion of assets. The business problem facing a bank analyst relates to the factors that affect return on assets​ (ROA), an...

Profitability remains a challenge for banks and thrifts with less than​ $2 billion of assets. The business problem facing a bank analyst relates to the factors that affect return on assets​ (ROA), an indicator of how profitable a company is relative to its total assets. Data collected from a sample of 194 community banks include the ROA​ (%), the efficiency ratio​ (%), as a measure of bank productivity​ (the lower the efficiency​ ratio, the​ better), and total​ risk-based capital​ (%), as a measure of capital adequacy. A multiple linear regression model resulted in an SSR of 5.25 and an SSE of 125.02.