ATLANTA -- A Federal Reserve Bank economist says a study of profits indicates that last year was not a good one for banks, which experienced the most widespread fall in earnings since 1981.

"Profitability problems for banks with assets below $50 million appear to be widespread and persistent," said Larry D. Wall, an economist with the Federal Reserve Bank of Atlanta.

"Moreover, the problems are not confined to banks in Midwestern agricultural and energy states. Profits also fell for banks in the southeastern states, even when the drag exerted by Louisiana banks was excluded," he said.

Louisiana and Texas banks have been hurt by the declining oil industry.

In addition, Wall said, "the continuing fall in {return on assets} figures at all levels of profitability for banks with assets below $50 million raises the question of whether small banks will be able to survive."

Wall studied three measures of bank health -- return on assets, return on equity, and adjusted net interest margin -- and concluded that banks of all sizes had lower profits in 1986.

"Overall ROA and ROE figures for the nation are down for all six size categories examined in this study," he said. "Not since 1981 has profitability fallen in every category."

Wall reviewed reports of 13,868 banks around the country. The study included 4,594 banks with less than $25 million in assets; 3,640 with assets between $25 million and $50 million; 2,872 between $50 million and $100 million; 2,209 between $100 million and $500 million; 216 between $500 million and $1 billion, and 337 with assets of more than $1 billion.

The study considered banks owned by holding companies as separate institutions.

Wall said he also placed the banks in three ranges of profitability, and "the results indicate that {low-profit banks} have seen more adverse, or less favorable, changes in profitability" than those ranking in the middle or high profit ranges.

"In all size categories, banks at the 25th percentile {meaning 75 percent of banks were more profitable} show a larger drop or a smaller gain in profits than banks in the same size category at the 50th or 75th percentiles. This finding suggests that bank failure rates will continue to be high," he said.

"Although slumping earnings would displease owners and managers of highly profitable banks, moderately reduced profitability at these banks should pose no public policy problems," Wall said.

"On the other hand, if the least profitable banks have suffered most of the decline in profitability, the drop could spell a potential increase in the number of problem and failed banks," he said.

"A growing incidence of troubled banks not only raises concern about the safety and soundness of the banking system, but also threatens to put stress on the Federal Deposit Insurance Corp., which insures accounts up to the first $100,000," he noted.

FDIC Chairman William Seidman predicted in June there would be 200 bank failures this year, compared with 138 last year.

Of the three measures he studied, Wall said, "I thought that return on assets is the most important. It is a fairly good overall measure of how the bank is performing."

Wall found banks with less than $25 million in assets had a 0.15 percent ROA for 1986, representing a continued decline from 1.2 percent in 1981.

Banks with between $25 million and $50 million in assets saw their ROAs drop from 1.16 percent in 1981 to 0.52 percent last year.

At the same time, overall bank ROA fell from 0.76 percent in 1981 to 0.65 percent in 1986, he said.

By comparison, banks with more than $1 billion in assets have had ROAs ranging from 0.61 percent in 1981 to 0.65 percent in 1986.

Wall said his findings "worried me in the sense of what {small banks'} future was likely to be. It didn't worry me in the sense of how depositors are going to be treated" because of the protection provided by the FDIC.

"Clearly, banks have become less profitable in the past few years, and the small banks have experienced the greatest decline," Wall wrote.