Bank Earnings on Tap After Wild Quarter

Scroll down to listen to audio clips of Laurie Kulikowski's interview with Hardesty Capital Management's Eric Schopf for an investor's take on banks repaying bailout money and the Public Private Investment Program.

With the economy still fumbling through a deep recession and regulators and Congress pushing for greater control over the inner workings of banking institutions, the second quarter did not represent ordinary times in the financial sector.

The bank stress tests conducted by the federal government, subsequent capital raises, stock conversions and accounting changes that went into effect between April and the end of June all will significantly impact bank earnings, which are set to begin rolling out with JPMorgan Chase's (JPM) results on Thursday and Citigroup's (C) and Bank of America's (BAC) reports the following day.

Citi, BofA and Wells Fargo (WFC) are among nine of the nation's 19 largest banks that have not yet repaid the federal government's preferred equity investments made through the Troubled Asset Relief Program. Others, like JPMorgan, US Bancorp (USB) and BB&T (BBT) have repaid the government after stress tests determined they were adequately capitalized.

Eric Schopf, vice president and portfolio manager at Hardesty Capital Management in Baltimore, offered his thoughts on what to expect in a conversation with TheStreet.com.

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TheStreet.com: Give an overall assessment of how you think the bank sector measured up in the second quarter.

Eric Schopf: There were an awful lot of moving parts in the second quarter. That's evident by the estimates out there on Wall Street and they're pretty much all over the place. It's fair to say that in the second quarter there are a number of trends that will carry over from the first quarter. First and foremost, unemployment continues to be a problem and that is going to weigh heavy on the consumer side of the balance sheet, if you will. Consumer loans are going to continue to underperform. Credit cards are going to continue to be a problem. [Banks are] going to be building the loan loss reserves. They're probably not high enough yet. And then, obviously, housing has still not corrected.