Lynn M. Barry reports that, for banks in both the nation and the Eighth District, 1988 was a year of recovery from the lackluster earnings reported in 1987. Aggregate bank profit ratios in the United States and the Eighth District improved last year as many banks began to rebound from the negative earnings caused by increased loan loss provisions tied to foreign loans. Barry also reports that profits improved in 1988 across virtually every asset-size category. Propelled by stronger earnings and improved asset quality, bank performance at the largest District banks improved significantly in 1988. Further gains were made in 1988 by the smaller District banks, which posted higher earnings as loan loss provisions and loan charge-offs declined. Barry expects continued improvement in the coming quarters. Asset quality problems, which have plagued some District banks, appear to be under control; thus, future loan problems should have a less severe effect on earnings.