Third Quarter, 1992 

FDIC 

Division of Research 

& Statistics 

Don Inscoe 

(202) 898-3940 

Ross Waldrop 

(202) 898-3951 

The FDIC 

uarter1Y------A-nd_re_w_c_.H_o_ve_,J_r._,c_ha_ir_m_an__ 

anking Rofile 

COMMERCIAL BANKING PERFORMANCE-THIRD QUARTER, 1992 

• Commercial Banks Report Third Consecutive Quarterly Earnings 

Record 

• Net Income Of $8.5 Billion Is Twice The Amount Earned A Year Ago 

• Loans Register First Increase In Six Quarters 

• Troubled Loans Continue Gradual Shrinkage 

Aided by favorable interest rate conditions and 

moderating asset-quality problems, commercial banks 

reported earnings of $8.5 billion in the third quarter of 

1992. This marked the third consecutive quarter that 

bank profits have set a new record. Third quarter net 

income was almost twice the $4.3 billion earned a 

year earlier, bringing total earnings for the first nine 

months of 1992 to $24.1 billion. The year-to-year 

improvement in earnings is attributable to the 

continued decline in interest rates and further modest 

improvements in asset quality. Falling interest rates 

produced wider net interest margins in the quarter, 

with net interest income up by $3 billion compared to 

the third quarter of 1991. Lower interest rates also 

resulted in higher market values for banks' investment 

securities portfolios, and banks realized $1.3 billion in 

gains from sales of securities, an increase of $600 

million from a year earlier. Provisions for future loan 

losses, at $6.8 billion, were down by $2.2 billion. The 

average return on assets for the quarter was 0.99 

percent, surpassing the quarterly record of 0.94 

percent set in the previous quarter, and up from 0.50 

percent in the third quarter of 1991. 

Chart A - Quarterly Net Income of FDIC-Insured 

Commercial Banks, 1988 - 1992 

$ Billions

10.------,.----,-------,-----,,-----, 

:7.3 

6 4 :,.. 6.9 

· 6.35_96.2 , • '.6.2

-- .5.4 :S.5 : 

r :I 4.6 4_ 5 I ■ 3 

. 3.7 • ■ 3.7 ,.. 

2.0 ; r : 0.9 : 

-~ n: ,■ : o...,_..............................,u""""......................................................._............"""I 

D Net Operallng Income : 

■ Securllles and Other Gains, Net 

D First Republic Effect 

(5) ............................... ..._...._..__.__ .................. _..._..._._.................... 

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 

1988 1989 1990 1991 1992 

Lower interest rates in the third quarter reduced the 

interest income that banks earned and the interest 

expense they paid . The persistent wide yield 

differential between long- and short-term interest rates 

and the increased proportion of equity funding meant 

that interest expense fell more sharply than interest 

income, producing increased net interest income. 

Total interest income of $63.7 billion was $8.4 billion 

less than in the third quarter of 1991, while total 

interest expense of $29.6 billion was $11.4 billion 

below the year-earlier level. As a result, net interest 

income of $34.1 billion was $3 billion higher. The 

average net interest margin for commercial banks was 

4.49 percent, up from 4.22 percent a year earlier. This 

was the widest quarterly net interest margin reported 

by commercial banks since quarterly income reporting 

began in 1983, and marked the sixth consecutive 

quarter that net interest margins have widened. 

Chart B - Quarterly Net Interest Margins of 

FDIC-Insured Commercial Banks, 1984 -1992 

Net Interest Margin (%) 

5 ..,....,....,......,....................................................................................,..,LL..LL,...... ..... . ....

Banks < 100 Million 4.~~• 

/

4.5 -■-~ . .J~- ~~ .... ,

' f' l 

4 

., ,~- ........,.--'-•-'-"'-

---~, Banks > 100 Mi llion m ..i 

3.5 ...................................................................................................................... 

123412341 2 3412341234123412341234123 

1984 1985 1986 1987 1988 1989 1990 1991 1992 

Troubled assets held by commercial banks fell for the 

second consecutive quarter, as a $2.5-billion decline 

in noncurrent loans outweighed a $237-million 

increase in other real estate owned. Noncurrent loans 

have fallen in each of the last six quarters, from $83.3 

Requests for copies of and subscriptions to the FDIC Quarterly Banking Profile should be made through the FD/C's 

Office of Corporate Communications, 550 17th Street, N. W., Washington, D. C. 20429; telephone (202) 898-6996. 

For assistance contact: Section508@fdic.gov
billion at the end of the first quarter of 1991 to $69.4 

billion at the end of September. The largest reduction 

in noncurrent loans in the third quarter occurred in 

commercial and industrial loans, which fell by $1.3 

billion, as banks took net charge-offs of $1.9 billion. 

Noncurrent real estate loans fell by only $824 million, 

despite net charge-offs of real estate loans in the third 

quarter totalling $2.6 billion, indicating that real estate 

loan portfolios continue to experience new problems. 

Banks' reserves for future loan losses increased 

slightly during the quarter. At the end of September, 

commercial banks held 79.7 cents of reserves for 

every dollar of noncurrent loans, the highest 

proportion since the first quarter of 1990. 

High levels of retained earnings and a favorable 

environment for new debt and equity issues continued 

to boost commercial banks' net worth in the third 

quarter. Total equity capital increased by $8.8 billion, 

to $257.3 billion at the end of September. Retained 

earnings contributed $5.6 billion of the capital 

increase. The industry's average equity-capital-to-assets 

ratio rose to 7.39 percent, its highest level since 1966. 

Commercial bank assets grew by $43 billion in the 

third quarter, led by expanded securities holdings. 

Mortgage-backed securities grew by $12.1 billion and 

U.S. Treasury securities increased by $10 billion. 

Loans and leases registered a $3.7 billion increase 

during the quarter, ending six consecutive quarters of 

loan shrinkage. Residential mortgages, consumer 

installment loans and home equity lines of credit were 

the main areas of lending strength, offsetting a 

$6.6-billion decline in commercial and industrial loans. 

Banks in the West Region were the only regional 

group to show an increase in their proportion of 

troubled assets in the third quarter. Other real estate 

owned grew by $582 million, overshadowing a 

$134-million drop in noncurrent loans. West Region 

banks were also the only group that did not 

experience an improvement in their average net 

interest margin during the quarter, as average asset 

yields fell sharply. Despite some evidence of 

continuing asset-quality problems, banks in the West 

Region reported higher earnings than a year ago due 

largely to lower provisioning for future loan losses. 

Banks in the Northeast Region continue to have the 

highest average proportion of troubled assets, as well 

as the highest level of loan losses, but both indicators 

show improving trends. 

The number of insured commercial banks reporting 

financial results fell to 11,590 at the end of September, 

a net decrease of 96 institutions during the quarter. 

Ten new commercial banks were chartered and 98 

banks merged with other institutions. Only nine 

commercial banks failed in the third quarter, the lowest 

quarterly total since seven banks failed in the fourth 

quarter of 1983. The number of commercial banks on 

the FDIC's UProblem Usr fell by 47, to 909 at the end 

of the quarter. Combined assets of uProblem" banks, 

at $487.9 billion, remained well above the level of a 

year earlier, but were below the $528 billion reported 

at the end of 1991. 

For calendar year 1992, commercial banks should 

easily surpass the previous full-year earnings record 

of $24.9 billion, set in 1988. Prospects for 1993 

depend on the strength of the economy and the level 

of interest rates, but commercial banks as a whole 

appear poised for continued strong earnings. Net 

interest margins will probably be narrower, but loan 

demand should continue to strengthen. As economic 

conditions improve, more substantial reductions in 

troubled assets may be realized. Strong capital growth 

has increased banks' lending capacity, and the 

proportion of highly liquid securities in their asset 

portfolios has risen, so that they should be able to 

accommodate a strong increase in loan demand if it 

materializes. 

Chart C - Troubled Real Estate Asset Rates* By State, September 30, 1992 

Midwest Central Northeast 

North Dakota 

2.61 

South Dakota 

2.03 

8.11 

11 .75 9.90 10.95 

Troubled Real Estate Asset Rate: 

D Less Than 4% • Noncurrent real estate loans plus 

BJ Between 4% and 8% other real estate owned as a percent ~­

• 8% or Higher of total real estate loans plus OREO. 

2 
REAL ESTATE LOAN PERFORMANCE AND OTHER REAL ESTATE OWNED, 

SEPTEMBER 30, 1992 

ASSET SIZE GEOGRAPHIC DISTRIBUTION 

LESS $1B $10B NORTH- SOUTH- MIO- SOUTHALL THAN $100MM TO OR EAST EAST CENTRAL WEST WEST WEST 

BANKS$100MM TO $1B $10B MORE REGION REGION REGION REGION REGION REGION 

PERCENT OF LOANS 30-89 DA VS PAST DUE 

All real estate loans 1.88% 1.58% 1.62% 1.87% 2.20% 2.52% 1.46% 1.47% 1.19% 1.48% 2.03% 

Construction and development 3.00 1.63 2.74 3.54 2.93 3.21 1.83 3.03 2.15 1.34 3.89 

Commercial real estate 2.14 1.45 1.62 2.07 3.09 3.38 1.27 1.37 1.55 1.37 2.45 

Multifamily residential real estate 2.21 1.49 1.33 2.00 3.32 3.24 1.39 1.66 1.54 1.26 2.32 

1-4 Family residential 1.47 1.21 · 1.23 1.50 1.76 2.39 1.09 0.87 0.63 1.27 1.54 

Home equity lines of credit 1.03 1.39 1.01 0.86 1.16 1.42 0.71 0.86 0.70 1.49 0.80 

Commercial R/E loans not secured by real estate 2.23 1.13 3.00 2.09 2.22 2.78 1.24 1.00 1.11 0.56 2.80 

PERCENT OF LOANS NONCURRENT* 

All real estate loans 4.30% 1.64% 2.18% 4.05% 7.07% 7.23% 2.48% 1.91 % 1.53% 2.50% 5.12% 

Construction and development 14.50 2.76 5.62 12.65 21.96 23.76 6.31 6.00 2.41 4.01 16.90 

Commercial real estate 5.77 2.10 3.01 5.33 10.84 10.01 3.82 2.78 3.12 3.89 5.92 

Multifamily residential real estate 5.02 1.96 2.54 4.48 8.40 8.85 3.12 2.21 2.08 2.34 5.14 

1-4 Family residential 1.47 1.21 1.23 1.50 1.76 2.39 1.09 0.87 0.63 1.27 1.54 

Home equity lines of credit 0.96 0.90 0.83 0.65 1.33 1.70 0.41 0.37 0.29 0.74 0.70 

Commercial R/E loans not secured by real estate 7.84 3.09 4.64 3.79 9.89 13.65 4.03 2.98 3.52 1.02 5.78 

PERCENT OF LOANS CHARGED-OFF (NET, ANNUALIZED) 

All real estate loans . 0.95% 0.19% 0.30% 0.82% 1.83% 1.66% 0.51% 0.84% 0.45% 0.43% 0.73% 

Construction and development 3.12 0.31 0.70 2.77 4.92 5.65 1.46 1.80 1.15 0.99 2.52 

Commercial real estate 1.40 0.28 0.48 1.10 3.20 2.10 0.84 1.93 1.08 0.65 0.87 

Multifamily residential real estate 1.53 0.47 0.47 0.90 3.20 3.06 0.55 0.99 1.31 0.44 0.77 

1-4 Family residential 0.21 0.14 0.13 0.21 0.31 0.43 0.17 0.07 0.08 0.19 0.11 

Home equity lines of credit 0.15 0.20 0.14 0.15 0.14 0.23 0.08 0.04 0.08 0.17 0.13 

Commercial R/E loans not secured by real estate 4.67 3.35 1.92 1.78 6.07 8.11 0.94 6.99 1.41 0.39 1.78 

TOTAL LOANS OUTSTANDING($ BILLIONS) 

All real estate loans $865.2 $98.9 $221.8 $257.9 $286.5 $262.0 $166.8 $148.3 $57.0 $54.7 $176.3 

Construction and development 87.7 6.1 16.7 28.4 36.5 27.7 15.9 11.9 3.4 4.1 24.7 

Commercial real estate 252.4 26.4 72.6 87.1 66.4 71.8 52.5 44.8 15.1 18.6 49.5 

Multifamily residential ·real estate 26.9 2.1 7.2 8.9 8.8 8.4 4.6 4.9 1.8 1.6 5.6 

1-4 Family residential 381.7 50.9 104.6 102.9 123.3 104.5 78.2 69.5 28.4 27.4 73.7 

Home equity lines of credit 73.3 3.0 14.8 27.9 27.6 27.0 12.1 11.8 2.4 0.8 19.3 

Commercial R/E loans not secured by real estate 21.7 0.5 2.0 4.9 14.2 7.9 2.7 2.8 0.6 0.8 6.8 

OTHER REAL ~STATE OWNED($ BILLIONS) 

All other real estate owned $28.0 $2.0 $4.8 $7.6 $13.7 $13.3 $3.7 $2.3 $1.2 $2.3 $5.2 

Construction and development 6.8 0.3 1.1 2.7 2.7 3.1 1.1 0.4 0.2 0.4 1.5 

Commercial real estate 14.5 0.9 2.3 3.6 7.7 6.4 2.0 1.4 0.7 1.3 2.7 

Multifamily residential real estate 2.1 0.1 0.3 0.4 1.3 1.4 0.1 0.1 0.1 0.1 0.3 

1-4 Family residential 3.0 0.6 0.9 0.6 0.8 1.2 0.5 0.2 0.1 0.4 0.6 

Home equity lines of credit 0.5 0.2 0.1 0.1 0.1 0.0 0.0 0.0 0.1 0.2 0.1 

Other real estate owned in foreign offices 1.2 0.0 0.0 0.0 1.1 1.2 0.0 0.0 0.0 0.0 0.0 

* Noncurrent loan rates represent the percentage of loans in each category 

that are past due 90 days or more or that are in nonaccrual status. 

3 
Table I. Selected Indicators, FDIC-Insured Commercial Banks 

1992* 1991 * 1991 1990 1989 1988 1987 

Return on assets ............................... 0.96% 0.59% 0.54% 0.49% 0.49% 0.82% 0.09% 

Return on equity ............................... 13.52 8.88 8.09 7.61 7.78 13.30 1.55 

Equity capital to assets ..................... 7.39 6.71 6.76 6.45 6.21 6.28 6.04 

Noncurrent loans and leases plus 

other real estate owned to assets ..... 2.80 3.07 2.99 2.90 2.26 2.14 2.46 

Net charge-offs to loans .................... 1.26 1.51 1.60 1.44 1.16 1.00 0.92 

Asset growth rate ............................. 1.40 1.47 1.21 2.73 5.37 4.36 2.01 

Net operating income growth ............. 67.01 -11.71 -0.74 3.20 -38.53 1554.74 -89.65 

Percentage of unprofitable banks ........ 6.48 11.43 11.19 13.41 12.50 14.65 17.66 

Number of institutions ....................... 11,590 12,073 11,920 12,340 12,707 13,139 13,696 

Number of problem banks .................. 909 1,005 1,016 1,012 1,092 1,394 1,559 

Assets of problem banks (billions) ...... $487.9 $401.0 $528.0 $341.6 $187 .9 $304.8 $329.2 

Number of failed/assisted banks ......... 64 82 108 159 206 221 201 

• Through September 30; ratios annualized where appropriate. Asset growth rates are for 12 months ending September 30. 

Table II. Aggregate Condition and Income Data, FDIC-Insured Commercial Banks 

(dollar figures in millions) 

Preliminary 

3nd Otr 2nd Otr 3rd Otr %Change 

1992 1992 1991 91 :3-92:3 

Number of banks reporting ................................ 11,590 11,686 12,073 -4.0 

Total employees (full-time equivalent) ............... .. 1,474,058 1,479,375 1,492,227 -1.2 

CONDITION DATA 

Total assets ..................................................... $3,481,467 $3,438,536 $3,433,326 1.4 

Real estate loans ......................................... 864,638 858,094 847,442 2.0 

Commercial & industrial loans....................... 539,501 546,090 572,194 -5.7 

Loans to individuals ..................................... 381,277 378,140 386,240 -1.3 

Farm loans.................................................. 36,719 35,968 35,949 2.1 

Other loans and leases .. .. .. ... .. .. .. .. .. .... .... .. .. .. 214, 136 214,296 219,142 -2.3 

Total loans and leases.................................. 2,036,270 2,032,588 2,060,967 -1.2 

LESS: Reserve for losses.............................. 55,287 55,300 54,333 1.8 

Net loans and leases....................................... 1,980,983 1,977,289 2,006,634 -1.3 

Temporary investments.................................. 516,813 507,487 508,784 1.6 

Securities over 1 year...... ............................... 575,140 553,657 490,867 17.2 

All other assets.............................................. 408,531 400,103 427,040 -4.3 

Total liabilities and capital.................................. 3,481,467 3,438,536 3,433,326 1.4 

Noninterest-bearing deposits ........................... 487,676 486,570 464,703 4.9 

Interest-bearing deposits................................. 2,157,792 2,170,142 2,201,378 -2.0 

Other borrowed funds..................................... 422,721 395,298 398,275 6.1 

Subordinated debt .......................................... 30,233 27,576 24,448 23.7 

All other liabilities........................................... 125,788 110,482 114,212 10.1 

Equity capital................................................. 257,258 248,466 230,311 11. 7 

Goodwill .......................................................... 6,068 5,650 4,578 32.5 

Loans and leases 30-89 days past-due............... 34,060 34,124 39,802 -14.4 

Noncurrent loans and leases.............................. 69,391 71,879 80,537 -13.8 

Restructured loans and leases ............................ 10,783 10,686 9,519 13.3 

Other real estate owned .. .. .. .. .... .. .. .. .. ................ 27,984 27,747 24,952 12.1 

Loan commitments and letters of credit.............. 1,428,171 1,402,459 1,350,648 5.7 

Domestic office assets...................................... 3,063,449 3,030,702 3,028,340 1.2 

Foreign office assets......................................... 418,018 407,834 404,986 3.2 

Domestic office deposits ................................... 2,343,541 2,353,145 2,364,215 -0.9 

Foreign office deposits...................................... 301,926 303,567 301,866 0.0 

Earning assets.................................................. 3,072,936 3,038,432 3,006,286 2.2 

Volatile liabilities............................................... 971,515 959,472 1,026,201 -5.3 

Preliminary Preliminary 

First Three First Three 3rd Otr 3rd Otr %Change

INCOME DATA Otrs 1992 Otrs 1991 %Change 1992 1991 91 :3-92:3 

Total interest income ..................... $193,565 $218,719 - 11 .5 $63,688 $72,066 -11.6 

Total interest expense .................... 94,728 128,156 -26.1 29,611 41,023 -27.8 

Net interest income ....................... 98,836 90,563 9.1 34,077 31,044 9.8 

Provision for loan losses ................. 19,686 24,037 -18.1 6,763 8,939 -24.3 

Total noninterest income ................ 49,229 44,057 11. 7 17,033 15,206 12.0 

Total noninterest expense ............... 96,928 91,267 6.2 33,301 31,817 4.7 

Securities gains (losses) ................. 3,221 1,515 112.6 1,287 687 87 .5 

Applicable income taxes ................. 10,848 6,773 60.2 3,922 2,030 93.2 

Extraordinary gains, net .................. 326 761 -57.2 94 104 -10.2 

Net income ................................. 24,150 14,820 62.9 8,505 4,254 99 .9 

Net charge-offs ............................. 18,686 23,389 -20.1 6,681 8,430 -20.8 

Cash dividends on capital stock ...... 8,642 10,155 -14.9 2,891 2,779 4.0 

Net operating income ..................... 21,460 12,850 67.0 7,494 3,587 108.9 

4 
Table Ill. First Three Quarters 1992 Commercial Bank Data (Dollar figures in billions, ratios in%) 

ASSET SIZE DISTRIBUTION GEOGRAPHIC DISTRIBUTION 

EAST WEST Lesa $100 Million Greater 

FIRST THREE QUARTERS Preliminary ALL than $100 to tl-10 than $10 Northeast Southeast Central Midwest Southwest West 

(The way it is .. . ) BANKS Million $1 Billion Billion Billion Region Region Region Region Region Region 

Number of banks reporting ................. 11,590 8,434 2,781 327 48 941 1,901 2,559 2,813 2,088 1,310 

Total assets ...... ................................ $3,481.5 $345.1 $875.3 $1,038.2$1,424.8 $1,328.8 $532.0 $571.3 $234.1 $275.1 $542.5 

Total deposits ................................... 2,845.5 304.7 580.8 780.9 979.1 912.5 419.1 447.4 191.0 234.6 441.0 

Net income (in millions) ..................... 24,150 2,882 5,239 8,025 8,003 7,920 4,105 4,314 2,245 2,272 3,294 

Percentage of banks losing money ...... 6.5% 6.5% 8.1 % 8.3% 8.3% 15.0% 7.8% 3.9% 2.0% 5.1 % 15.6% 

Percentage of banks with earnings gains . 78.2 77.1 81.2 82.0 89.6 78.2 83.2 79.0 74.5 82.7 70.6 

Performance Ratios (annualized) 

Yield on earning assets ...................... 8.75% 8.72% 8.58% 8.48% 9.08% 9.15% 8.52% 8.58% 8.48% 7.87% 8.80° 

Cost of funding earning assets ............ 4.28 3.98 3.83 3.89 5.07 5.12 3.86 4.01 3.97 3.50 3.49 

Net interest margin ................ ............ 4.47 4.74 4.75 4.77 4.01 4.02 4.68 4.57 4.51 4.36 5.31 

Noninterest income to earning assets .. . 2.23 1.08 1.32 2.51 2.79 2.75 1.72 1.68 2.33 1.73 2.29 

Noninterest expense to earning assets . 4.38 3.84 3.94 4.62 4.58 4.46 4.18 3.94 4.26 4.25 5.03 

Net operating income to assets ........... 0.86 1.03 0.98 0.96 0.6"1 0.67 0.99 0.99 1.21 0.97 0.80 

Return on asset s ....... ... .. .... .. .. ..... ...... 0.96 1.13 1.05 1.05 0 .81 0 .83 1.07 1.05 1.29 1 .12 0.86 

Return on equity ............................... 13.52 12.09 13.04 14.31 13.66 13.09 14.17 13.72 15.40 15.53 11.54 

Net charge-offs to loans and leases .. ... 1.26 0.46 0 .68 1.36 1.64 1.77 0 .76 1.05 0 .83 0.74 1.1 4 

Loan loss provision to net charge-offs .. 105.35 126.61 126.43 110.51 96.27 98.99 116.74 107.80 115.82 91.13 118.21 

Condition Ratios 

Loss allowance to: 

Loans and leases ............................ 2.72% 1.78% 1.90% 2.80% 3.24% 3.38% 2.07% 1.89% 2.04% 2.38% 3.04% 

Noncurrent loans and leases ............. 79.67 100.42 89.76 95.79 68.34 68.57 102.74 102.59 127.78 105.60 75.95 

Noncurrent loans and leases plus 

other real estate to asset s ................ 2.80 1 .51 1.94 2.50 3 .73 3 .81 1 .89 1.50 1.41 1 .88 3 .63 

Equity capital ratio ............. .. ............. 7 .39 9 .56 8 .29 7 .68 6.23 6 .57 7.75 7 .87 8 .69 7 .48 7 .91 

Core capital (leverage) ratio ................ 7.16 9.47 8.15 7.37 5.96 6.53 7.55 7.69 8.50 7.34 7.06 

Net loans and leases to deposits ......... 74.88 58.83 66.29 78.23 82.31 80.04 74.06 75.25 67.94 52.70 79.44 

Growth Rates (year-to-year) 

Assets ............... .. ..... .. ..................... 1.4% 4.6% 5.2% 5.9% 14.5% 2.6% 1.7% 1.9% 2.1 % 1.2% -2.3% 

Equity capital .................................... 11. 7 8.1 10.5 16.6 31.3 12.9 10.4 8.6 8.4 11.7 15.5 

Net interest income ........................... 9.1 12.6 13.0 14.7 23.5 10.6 13.5 11.2 4.8 16.3 0.4 

Net income....................................... 62.9 42.4 37.4 86.1 75.5 164.9 54.3 18.5 20.6 70.7 40.9 

Noncurrent loans and leases plus 

other real estate owned ............ ....... -7.7 -7.6 -0.4 -11 .5 13.8 -8.6 -15.6 -13.2 -10.3 -22.1 9.5 

Net charge-offs ................................. -20.1 -11 .9 -11.8 -11.4 -12.9 -26.8 -26.4 28.7 -18.2 -36.8 -13.3 

Loan loss provision ............................ -18.1 -10.1 -11.1 -17.9 5.5 -16.2 -31.6 12.9 -13.9 -34.5 -27.7 

PRIOR FIRST THREE QUARTERS 

(The way it was .. . ) 

Return on assets ...... ............... 1991 0.59% 0.93% 0.78% 0 .64% 0.39% 0.32% 0.71 % 0.89% 1.10% 0.67% 0 .57 % 

.............................. 1989 0 .57 0.86 0.93 0.83 0.08 0 .10 0.95 1.03 1.10 0.06 1.00 

........................ ...... 1987 0.02 0.65 0.71 0.58 -1.03 -0.39 0 .98 0.44 0.65 -0.47 -0.16 

Equity capital ratio ..... ...... ... .... 1991 6.71 9.14 7 .79 6.98 5.35 5.97 7.14 7.38 8.18 6.77 6.69 

.............................. 1989 6.34 9.15 7.60 6.39 4.80 5.70 7.07 6 .94 7.76 5.90 6.25 

.............................. 1987 6.13 8.80 7.48 6.27 4.35 5.42 7.05 6.80 7.61 6.46 5.64 

Noncurrent loans and leases plus 

other real estate owned to assets. 1991 3.07 1.73 2.14 2.93 3.99 4.28 2.28 1.77 1.60 2 .46 3.24 

.............................. 1989 2.36 1.92 1.82 1.82 3.25 2.76 1.34 1.33 1.47 4 .76 2.54 

................... ........... 1987 2.56 2.27 2.00 1 .86 3.53 2.51 1.14 1.40 2.04 5 .49 3 .55 

Net charge-offs to loans and leases .. 1991 1.51 0.57 0.84 1.64 1.95 2.32 1.04 0.81 1.02 1 .17 1.17 

.............................. 1989 0.89 0.63 0.63 0 .90 1.08 0.92 0.50 0.66 1.10 1 .51 1.06 

.............................. 1987 0 .80 1.00 0.81 0 .75 0.78 0.57 0.52 0.53 1.42 1.86 1.00 

Regions: Northeast­ Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, 

New York, Pennsylvania, Puerto Rico, Rhode Island, Vermont 

Southeast­ Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, West Virginia 

Central­ Illinois, Indiana, Kentucky, Michigan, Ohio, Wisconsin 

Midwest­ Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota 

Southwest­ Arkansas, Louisiana, New Mexico, Oklahoma, Texas 

West- Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, Oregon, Pacific Islands, Utah, 

Washington, Wyoming 

5 
Table IV. Third Quarter 1992 Commercial Bank Data (Dollar figures in billions, ratios in %) 

ASSET SIZE DISTRIBUTION GEOGRAPHIC DISTRIBUTION 

LeH t100 Million Greater EAST WEST 

THIRD QUARTER Preliminary 

(The way it is .. . ) 

ALL 

BANKS 

than $100 

Million 

to 

tl Billion 

tl-10 

Billion 

than t10 

Billion 

Northeaat 

Region 

Southeaat 

Region 

Central 

Region 

Midweat 

Region 

Southweat 

Region 

West 

Region 

Number of banks reporting .................. 11,590 8,434 2,781 327 48 941 1,901 2,559 2,813 2,066 1,310 

Total assets ....................................... $3,481.5 $345.1 $675.3 $1,036.2 $1,424.8 $1,326.6 $532.0 $571.3 $234.1 $275.1 $542.5 

Total deposits ..•.•••............................. 2,645.5 304.7 580.8 780.9 979.1 912.5 419.1 447.4 191.0 234.6 440.9 

Net income (in millions) ....................... 8,505 1,004 1,740 2,814 2,947 3,102 1,381 1,238 735 784 1,264 

Percentage of banks losing money ....... 6.8% 6.9% 6.0% 9.2% 4.2% 12.1% 6.9% 4.8% 3.1% 6.1% 15.4% 

Percentage of banks with earnings gains . 71.4 69.3 77.0 78.3 81.3 73.3 76.5 70.6 69. 1 73.7 65.6 

Performance Ratios (annualized) 

Yield on earning assets ........................ 8.39% 8.63% 8.37% 8.16% 8.64% 8.74% 8.14% 8.20% 8.26% 7.66% 8.47°1/o 

Cost of funding earning assets ............. 3.90 3.68 3.62 3.33 4.69 4.73 3.44 3.62 3.64 3.13 3.13 

Net interest margin ............................. 4.49 4.84 4.86 4.84 3.96 4.01 4 .71 4.68 4.62 4 .43 6.34 

Noninterest income to earning assets .... 2.24 1.10 1.36 2.67 2.76 2.76 1.70 1.68 2.36 1.78 2.31 

Noninterest expense to earning assets ... 4.39 3.90 4.02 4.68 4.48 4.40 4.24 3.97 4.39 4.30 6.00 

Net operating income to assets ............. 0.87 1.06 0.94 1.00 0.70 0.78 1.00 0.84 1.16 1.01 0.82 

Return on assets .. .... .... ....................... 0.99 1.17 1.04 1.10 0 .84 0.94 1.06 0.89 1.26 1.16 0.94 

Return on equity ................................. 13.64 12.34 12.61 14.43 13.77 14.62 13.71 11.34 14.66 16.47 12.16 

Net charge-offs to loans and leases ....... 1.32 0.60 0.78 1.31 1.77 1.62 0 .71 1.69 0.99 0.76 1.29 

Loan loss provision to net charge-offs ... 101.22 126.62 126.30 114.96 86.9i 100.24 117.10 97.48 103.38 81.16 104.04 

Growth Rates (year-to-year) 

Net interest income .... ......................... 9.8% 11 .6% 11 .9% 14.4% 22.1% 9.8% 14.1 % 10.5% 5.4% 15.2% 5 .1% 

Net income ........ ................... ............. 99.9 39.2 40.6 99.2 146.7 256.4 69.8 9.4 26.8 62.2 237.1 

Net charge-offs ................................... -20.8 -13.1 -8.0 -16.9 -13.3 -36.9 -41.3 78.5 -3.8 -19.5 -6.2 

Loan loss provision ............................. -24.3 -12.0 -14.0 -17.6 -2.9 -21.0 -42.0 36.6 -17.4 -37.7 -46.3 

PRIOR THIRD QUARTERS 

(The way it was . . . ) 

Return on assets ..................... 1991 0.50% 0.84% 0.70% 0 .62% 0 .23% 0.28% 0 .64% 0.82% 1.02% 0.72% 0.27 % 

............................. 1989 -0.10 0 .84 0.83 0.78 -1.61 -1.40 0 .89 0.98 1.01 -0.29 0.82 

............................. 1987 0 .79 0.65 0.74 0.84 0.84 0.94 1.05 0 .92 0.99 -0.46 0.76 

Net charge-offs to loans end leases 

............................. 1991 1.65 0.64 0.93 1.69 2.19 2.54 1.22 0.89 1.05 0.96 1.29 

............................. 1989 0.97 0.67 0 .75 1.07 1.07 0.99 0.57 0.65 1.46 1.73 1.10 

............................. 1987 0.84 1.04 0.89 0.83 0.76 0.57 0.58 0.61 1.43 2.18 0.96 

6 
SAVINGS BANK PERFORMANCE - THIRD QUARTER, 1992 

• BIF-lnsured Savings Banks Earn $354 Million 

• Five Institutions Fail During the Quarter 

• Troubled Assets Held by the Remaining Savings Banks Continue to Drop, 

While Their Capital Ratios Climb 

The 421 savings banks insured by the FDIC Bank Insurance Fund ("BIF") earned $354 million in the third quarter 

of 1992. This is the third quarter in a row in which 

savings banks have earned a profit, following 11 consecutive quarters of net losses. Net income was $137 million 

higher than the amount earned in the previous quarter and 

represented a $713 million improvement over the $359 

million net loss reported in the third quarter last year. 

Much of the improvement reflects FDIC's resolution of 

troubled institutions during the last 1 2 months. 1 If the effect of resolutions is excluded, earnings of the remaining 

421 savings banks increased $44 million from the second 

quarter of 1992. 

Aggregate third quarter return on assets was 0.63 percent, up from 0.37 percent the previous quarter and a 

negative 0.58 percent registered in the third quarter of 

1991. The 311 institutions in the New England states 

reported an aggregate return on assets of 0.47 percent, 

. while the 95 savings banks in the other Northeastern 

states reported a significantly higher figure: 0.67 percent. 

Return on assets at the 15 savings banks located outside 

the Northeast averaged 1 . 7 2 percent. 

The higher net income reported by BIF-insured savings 

banks in the third quarter is attributable to today's low interest rates, the wide spread between short- and longterm rates, and lower loan loss provisions. Securities gains 

are up substantially from the previous periods. Net interest 

margins have increased seven quarters in a row as falling 

interest rates have reduced savings banks' interest paid to 

depositors and other creditors faster than their income 

earned on loans and other assets decreased. Lower loan 

loss provisions are mainly the result of the failure of insolvent institutions. 

Ninety-three percent of all savings banks were profitable in 

the third quarter, up from 87 percent the previous quarter. 

In aggregate, institutions in the New England states have 

lower earnings than institutions headquartered elsewhere 

in the Northeast. Eight percent of the New England institutions lost money, compared with five percent of the institutions in the other Northeastern states. All fifteen institutions headquartered outside of the Northeast were 

profitable in the third quarter. 

Savings banks' troubled assets continue to decline . 

Troubled assets fell by $1 .4 billion during the quarter 

(down 12 percent) and by $3.5 billion during the twelve 

month period. Much of the reduction in troubled assets is 

due to FDIC resolutions. Troubled assets held by the 421 

surviving institutions fell by $289 million during the 

quarter. Their noncurrent loans declined by $431 million 

while their other real estate owned - primarily repossessed 

real estate - increased $142 million. Troubled assets held 

by the remaining institutions in the New England states 

decreased 4.1 percent (down by $198 million), while they 

decreased 1.3 percent (down $72 million) in the other 

Northeast states. 

Reserve coverage of troubled loans improved at the surviving savings banks during the quarter due to the decline in 

noncurrent loans. As of September 30, 1992, institutions 

in the New England states held 53 cents in reserve for 

every dollar of troubled loans while those in the other 

Northeastern states held 34 cents. Reserve coverage 

levels remain strongest at the institutions located outside 

New England and the Northeast. These institutions held 

88 cents in reserves for each dollar of noncurrent loans . 

Equity capital ratios continued to benefit from retained industry profits and shrinking assets. The 421 savings 

banks had an aggregate equity capital to assets ratio of 

7.69 percent at the end of the third quarter, up from 7.30 

percent at the end of the second quarter. 

Total assets of BIF-insured savings banks declined by $9.2 

billion (4 percent) during the quarter, mainly due to the failure of seven savings banks (including the two institutions 

which failed on October 2, 1992) with total assets of 

$6.8 billion. An unassisted merger resulted in a further asset shrinkage of $1 .2 billion during the quarter. 2 Assets 

at the remaining 421 savings banks declined $1.2 billion. 

Their net loans were $965 million lower than the previous 

quarter and their mortgage-backed securities were $450 

million lower. Home mortgage loans increased slightly-by 

$2 million while construction loans dropped $243 million 

and commercial real estate loans shrank $702 million. 

Fourth quarter earnings are likely to fall below the amount 

earned in the third quarter, especially if the remaining 

savings banks increase their loan loss provisions. If shortterm interest rates continue to rise, net interest margins at 

savings banks likely will narrow. The outlook for 1993 will 

depend on the economy in the Northeast and the level of 

interest rates. One of every five savings banks holding 32 

percent of the industry's assets remain on FDIC's 

"problem list" despite removal of failed institutions and improvements at many survivors. 

1 Twenty-seven savings banks with $29 .3 billion in assets failed since September 30, 1991, including two institutions - First Constitution 

Bank, New Haven, CT, and The Howard Savings Bank, Newark, NJ, -which failed on October 2, 1992 but did not file final September 

30, 1992 Call reports. 

2 Shawmut Bank, NA, Boston, MA, an FDIC-insured commercial bank, absorbed The Provident Institution for Savings on September 26, 

1992. 

7 
Table I. Selected Indicators, Savings Banks Insured by the FDIC Bank Insurance Fund (BIF) 

1992* 1991 * 1991 1990 1989 1988 1987 

Return on assets ...................................... 0.56% -0.44% -0.50% -0.98% -0.27% 0.44% 0.84% 

Equity capital to assets ............................. 7.69 6.87 6.74 6.62 7.06 7.44 7.69 

Noncurrent loans and leases plus 

other real estate owned to assets• • ........ 4.71 5.89 5.86 5.13 2.64 1.51 0.95 

Noncurrent RE loans to total RE loans•• ..... 4.36 5.78 5.65 5.32 3.14 1.67 1.01 

Asset growth rate .................................... -6.24 -9.69 -8.35 -7.46 -1.52 8.52 10.54 

Deposit growth rate .................................. -5.32 -7.11 -5.68 -4.98 1.36 7.90 5.81 

Number of institutions .............................. 421 445 441 469 489 492 484 

Number of problem savings banks .... .......... 84 76 74 34 17 12 16 

Assets of problem savings banks (billions) .. $70.4 $85.9 $81.8 $67.2 $47.6 $47.4 $29.3 

Number of failed savings banks ................. 16 10 19 10 1 0 2 

• Through September 30; rates annualized where appropriate. Asset and deposit growth rates are for 12 months ending September 30. 

• • Excludes Federally-chartered Savings Banks before 1990. 

Table II. Aggregate Condition and Income Data, BIF-lnsured Savings Banks 

(dollar figures in millions) 

Preliminary 

3rd Otr 2nd Otr 3rd Otr % Change 

1992 1992 1991 91 :3-92:3 

Number of savings banks reporting ..................... 421 430 445 -5.4 

Total employees (full-time equivalent) ................. 65,185 67,914 67,795 -3.9 

CONDITION DATA 

Total assets ...................................................... $222,519 $231,697 $237,319 -6.2 

Mortgage loans ............................................... 128,623 134,492 142,688 -9.9 

1-4 family residential .................................... 90,372 93,514 96,195 -6.1 

Construction and land development.. .............. 3,488 4,037 5,954 -41 .4 

Commercial and multi-family ......................... 34,763 36,941 40,540 -14.2 

All other loans and leases ................................ 13,942 14,617 17,812 -21.7 

LESS: Reserves for losses ............................. 2,662 2,973 2,838 -6.2 

LESS: Other contra accounts ......................... 415 478 630 -34.1 

Net loans and leases ....................................... 139,487 145,659 157,032 -11.2 

Mortgage-backed securities .............................. 19,757 20,446 21,593 -8.5 

Other real estate owned .................................. 4,274 4,602 4,620 -7.5 

Goodwill ............. , .......................................... 759 803 1,159 -34.5 

All other assets ............................................... 58,241 60,187 52,915 10.1 

Total liabilities and capital .................................. 222,519 231,697 237,319 -6.2 

Interest-bearing deposits .................................. 180,448 188,866 192,130 -6.1 

Noninterest-bearing deposits ............................ 7,158 7,183 6,018 18.9 

Other borrowed funds ..................................... 15,480 15,876 19,569 -20.9 

Subordinated debt ........................................... 241 256 523 -53.9 

Other liabilities ................................................ 2,074 2,598 2,785 -25.5 

Equity capital .................................................. 17,118 16,918 16,294 5.1 

Loans and leases 30-89 days past due ................ 3,644 4,014 5,125 -28.9 

Noncurrent loans and leases ............................... 6,209 7,326 9,357 -33.7 

Other noncurrent assets ..................................... 24 25 22 7.8 

Direct and indirect investments in real estate ....... 595 709 1,028 -42.2 

Preliminary Preliminary 

First Three First Three 3rd Otr 3rd Otr % Change 

INCOME DATA Otrs 1992 Otrs 1991 % Change 1992 1991 91 :3-92:3 

Total interest income ..................... $12,966 $15,514 -16.4 $4,231 $5,057 -16.3 

Total interest expense .................... 7,318 10,813 -32.3 2,258 3,453 -34.6 

Net interest income ..................... 5,648 4,701 20.1 1,973 1,604 23.0 

Provisions for losses ...................... 965 1,734 -44.3 328 671 -51.1 

Total noninterest income ................ 1,016 879 15.6 361 295 22.2 

Total noninterest expense .............. 4,331 4,502 -3.8 1,499 1,613 - 7.1 

Securities gains (losses) ................. 294 156 88.1 129 53 143.7 

Applicable income taxes ................. 742 365 103.3 279 105 165.0 

Extraordinary gains, net ................. 14 79 -82.2 (4) 78 N/M 

Net income ................................. 933 (787) N/M 354 (359) N/M 

Net charge-offs ............................. 1,080 1,500 -28.0 363 567 -36.0 

N/M - Not meaningful 

8 
Table Ill. First Three Quarters 1992 Savings Bank Data (Dollar figures in billions, ratios in %) 

ASSET SIZE DISTRIBUTION GEOGRAPHIC DISTRIBUTION All 

BIF-lnsured Less $100 Million Greater New Other Rest FIRST THREE QUARTERS Preliminary Savings than $100 to than 

Banks Million $1 Billion $1 Billion England Northeast of U.S. 

Number of savings banks reporting ...................... 421 120 248 53 311 95 15 

Total assets ....................................................... $222.5 $6.4 $78.6 $137 .6 $101.0 $109.8 $11.6 

Total deposits .................................................... 187.6 5.7 68.3 113.6 87.2 93.3 7.1 

Net income (in millions) ................................... .... 933 24 322 588 269 535 129 

Percentage of savings banks losing money ........... 11.9% 11.7% 10.9% 16.9% 14.1% 6.3% 0.0% 

Percentage of savings banks with earnings gains .. 88.1 91.7 87.1 84.9 88.4 89.5 73 .3 

Performance Ratios (annualized) 

Yield on earning assets ....................................... 8.44% 8.79% 8.46% 8.42% 8.51% 8.32% 9.05% 

Cost of funding earning assets .............. .............. 4.77 4.69 4.68 4.82 4.69 4.79 5.17 

Net interest margin ............................................. 3.68 4.09 3.78 3.60 3.82 3.53 3.88 

Noninterest income to earning assets ................... 0.66 0.39 0.51 0.76 0.65 0.58 1.59 

Noninterest expense to earning assets ................. 2.82 3.14 2.93 2.74 3.26 2.42 2.79 

Return on assets ................................................ 0.56 0.50 0.55 0.57 0.36 0.65 1.50 

Return on equity ................................................. 7.47 6.06 6.90 7.91 4.95 8.64 15.12 

Net charge-offs to loans and leases ..................... 1.01 0.71 0.71 1.19 1.14 0.96 0.20 

Loan loss provision to net charge-offs .................. 89.39 94.35 104.90 83.97 91.49 83.48 234.07 

Condition Ratios 

Loss allowance to: 

Loans and leases ............................................. 1.88% 1.22% 1.56% 2.11% 1.97% 1.88% 1.18% 

Noncurrent loans and leases ............................. 42.88 47.90 51.56 39.82 53.38 34.40 87.91 

Noncurrent loans and leases plus 

other real estate owned to assets ................... 4.71 2.88 3.69 5.38 4.56 5.15 1.88 

Noncurrent RE loans to total RE loans .................. 4.36 2.54 2.95 5.30 3.58 5.48 1.36 

Equity capital ratio ..... ......................................... 7.69 8.29 8.19 7.38 7.40 7.68 10.31 

Core capital (leverage) ratio ................................. 7.52 8.28 8.12 7.09 7.25 7.45 10.33 

Net loans and leases to deposits .......................... 74.35 73.38 73.65 74.82 75.58 70.52 109.75 

Growth Rates (year-to-year) 

Assets ............................................... ............... -6.2% 3.9% 4.5% 3.9% -1.4% -11.0% 1.9% 

Equity capital ..................................................... 5.1 6.0 6.8 2.6 5.6 3.5 13.9 

Net interest income ............................................ 20.1 25.8 24.3 24.8 22.9 18.0 16.0 

Net income ........................................................ N/M N/M N/M N/M N/M N/M 31 .3 

Net charge-offs .................................................. -28.0 -21.5 -29.9 -22.5 -36.0 -15.6 -32.7 

Loan loss provision ............................................. -44.3 -27.8 -40.3 -25.1 -44.9 -45.2 - 1 .0 

N/M - Not meaningful 

Geographic Distribution: New England - Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont 

Other Northeast- Delaware, Maryland, New Jersey, New York, Pennsylvania 

Rest of U.S. - Alaska, Florida, Indiana, Oregon, Washington 

9 
Table IV. Third Quarter 1992 Savings Bank Data (Dollar figures in bi/Dons, ratios in%) 

All ASSET SIZE DISTRIBUTION GEOGRAPHIC DISTRIBUTION 

BIF-lnsured Less $100 Million Greater New Other Rest THIRD QUARTER Preliminary Savings tha·n $100 to than 

Banks Million $1 Billion $1 Billion England Northeast of U.S. 

Number of savings banks reporting ...................... 421 120 248 53 311 95 15 

Total assets ....................................................... $222.5 $6.4 $78.6 $137.6 $101.0 $109.8 $11.6 

Total deposits .................................................... 187.6 $5.7 $68.3 $113.6 $87.2 $93.3 $7 .1 

Net income fin millions) ....................................... 354 12 144 198 119 186 49 

Percentage of savings banks losing money ........... 7.1% 5.0% 6.1% 17.0% 8.0% 5.3% 0.0% 

Percentage of savings banks with earnings gains .. 85.7 84.2 87.5 81.1 85.9 85.3 86.7 

Performance Ratios (annualized) 

Yield on earning assets ....................................... 8.22% 8.54% 8.26% 8.18% 8.25% 8.10% 9.05% 

Cost of funding earning assets ............................ 4.39 4.29 4.32 4.43 4.29 4.42 4.90 

Net interest margin ............................................. 3.83 4.25 3.93 3.75 3.95 3.69 4.15 

Noninterest income to earning assets ................... 0.70 0.42 0.57 0.79 0.68 0.62 1.69 

Noninterest expense to earning assets ................. 2.91 3.12 2.95 2.88 3.33 2.52 2.99 

Return on assets ................................................ 0.63 0.73 0.74 0.57 0.47 0.67 1.72 

Return on equity ................................................. 8.35 8.90 9.09 7.86 6.42 8.89 16.68 

Net charge-offs to loans and leases ..................... 1.02 0.59 0.71 1.23 1.05 1.10 0.13 

Loan loss provision to net charge-offs .................. 90.30 86.79 97 .61 87.93 93.17 84.87 292.20 

Growth Rates (year-to-year) 

Assets .............................................................. -6.2% 3.9% 4.5% 3.9% -1.4% -11.0% 1.9% 

Equity capital ..................................................... 5.1 6.0 6.8 2.6 5.6 3.5 13.9 

Net interest income ............................................ 23.0 25.7 26.2 27 .7 24.5 21.8 20.2 

Net income ........................................................ N/M N/M N/M 438.6 N/M N/M 46.1 

Net charge-offs .................................................. -36.0 -34.2 -37.5 -14.1 -46.1 -22.9 20.1 

Loan loss provision ............................................. -51 .1 -57.3 -53.4 -27.7 -54.2 -47.2 -56.5 

N/M - Not meaningful 

Spread Between Short-Term and Long-Term Yields 

30-Year Treasury Bond Versus 3-Month Treasury Bill 

Yield 

10% r-------------------------------

9 

8 ■-------········ ··----------.. 7 ;·-------------

/ 30-Year Treasury Bond 6 

5 

4 3-Month Treasury Bill 

3 

2 .....___......,__,_1-__...i...,__-'--__.....___i...._--1____,i.__---1,__.......... 

1990:1 o 1990:20 1990:30 1990:40 1991 :1 o 1991 :20 1991 :30 1991 :40 1992:1 o 1992:20 1992:30 

Quarterly Average Yield: 

30-Year 

Treasury Bond 8.44 8.65 8.80 8.55 8.20 8.32 8.18 7.85 7.80 7.90 7.44 

3-Month 

Treasury Bill 7.76 7.75 7.48 6.99 6.02 5.56 5.38 4.54 3.91 3.68 3.08 

Spread 0.68 0.90 1.32 1.56 2.18 2.76 2.80 3.31 3.89 4.22 4.36 

10 
Number of Commercial and Savings Banks on FDIC's "Problem List" 

1985-1992 

Number of Banks 

1,575 fill] Savings Banks 1,500 

I Commercial Banks 

1,000 

500 

0 

12/85 12/86 12/87 12/88 12/89 12/90 3/91 6/91 9/91 12/91 3/92 6/92 9/92 

Number of Problem Institutions: 

Savings Banks 42 27 16 12 17 34 48 58 76 74 70 88 84

Commercial Banks 1,098 1.457 1,559 1,394 1,092 1,012 996 975 1,005 1,016 981 956 909 

Assets of Commercial and Savings Banks on FDIC's "Problem List" 

1985-1992 

$ Billions 

700 ,-------------------------------'""'I 

609.8 607.4 DSavings Banks 600 

I Commercial Banks 

500 

400 

300 

200 

100 

0 

12/85 12/86 12/87 12/88 12/89 12/90 3/91 6/91 9/91 12/91 3/92 6/92 9/92 

Assets of Problem Institutions: 

Savings Banks 63.9 49.7 29.3 47.4 47.6 67.2 81.8 65.4 85.9 81.8 72.0 73.0 70.4 

Commercial Banks 173.9 285.8 329.2 304.8 187.9 341 .6 317.9 348.8 401 .0 528.0 535.4 494.5 487.9 

11 
NOTES TO USERS: 

COMPUTATION METHODOLOGY FOR PERFORMANCE AND CONDITION RATIOS 

The data on commercial banks and state-chartered savings banks were obtained from Call report, filed with the FDIC and Federal Reserve Board. Data on Federallychartered saving• bank, were obtained from Thrift Financial Reports filed with the Office of Thrift Supervision. Certain adjustment, are made to the Thrift Financial 

Report, to provide closer conformance with Call report di1clo1ure requirements. 

All income figure, used in calculating performance ratio, represent amount, for that period, annualized (multiplied by the number of periods In a year). 

All a11et and liability figures used in calculating performance ratios represent average amount, for the period (beginning-of-period amount plus end-of-period amount 

plus any period, in between, divided by the total number of periods). 

All a11et and liability figure, used in calculating the condition ratio, represent amount, as of the end of the quarter. Current quarter and year-ago quarter Income and 

expense amounts and performance ratio• are adjusted to account for "pooling• of Interest• and "purchase acquisition•• beginning with the fourth quarter, 1991 publication. 

DEFINITIONS 

"Problemw Bank■ -Federal regulator, a~•ign to each financial institution a composite rating, based upon an evaluation of financial and operational criteria. The rating 

i1 baaed on a scale of 1 to 5 in ascending order of supervisory concern. "Problem" bank, are those institution, with financial, operational, or managerial weakne11es 

that threaten their continued financial viability. Depending upon the degree of risk and 1upervi10ry concern, they are rated either a •4• or "5. • 

Earning aeta - all loans and other investment, that earn interest, dividend or fee income. 

Net Operating Income -income excluding di1cretionary transaction• such as gain• (or lo11es) on the sale of investment 1ecuritie1 and extraordinary item . Beginning with the first quarter 1992 publication, income taxes subtracted from operating income have been adjusted to exclude the portion applicable to securities gains (or 

loues). 

Yield on Earning Aaaeta -total interest, dividend and fee income earned on loan, and investment, as a percentage of average earning aueta. 

Coat of Funding Earning Auet■ -total interest expense paid on deposits and other borrowed money as a percentage of average earning assets. 

Net lntere t Margin -the difference between the yield on earning assets and the coat of funding them, i.e., the profit margin a bank earns on its loans and investments. 

Return on aeta - net income (including securities transactions and nonrecurring item1I as a percentage of average total asaets. The basic yardstick of bank 

profitability. 

Return on Equity-net Income as a percentage of average total equity capital. 

loan Commitments and letter■ of Credit-includes unused credit card commitment, and overdraft plan,, reflecting Call report revisions effective March 31, 

1990. 

Net Charge-off■ -total loans and leases charged off (removed from balance sheet because of uncollectibilityl during the quarter, leas amounts recovered on loans 

and lease ■ previously charged off. 

Noncurrent loana & leaaea -the ,um of loans past-due 90 days or more and loan, in nonaccrual atatu1. 

Other Real Eatate Owned-primarily foreclosed property. Direct and indirect investment, in real estate ventures are excluded where appropriate. 

Other Noncurrent ■■eta -debt securities and other assets (excluding loans, leases and other real estate ownedl that are either past-due at least 90 days or in nonaccrual status. Due to reporting differences, only defaulted debt securities are included for Federal Savings Banks. 

Core Capital - common equity capital plus noncumulative perpetual preferred stock plus minority interest in consolidated subsidiaries, leH goodwill and other ineligible intangible asaets. Eligible intangibles (including mortgage servicing rights I are limited to 100 percent of core capital for savings banks, to 50 percent of core capital for state-chartered commercial banks that are not Federal Reserve members, and to 25 percent for National banks. 

Net loan■ and lea ■ -total loans and leases less unearned income and the allowance for loans and lease losses. 

Temporary lnve tmenta -the sum of interest-bearing balances due from depository institutions, federal funds sold and securities purchased under agreements to 

resell, trading-account assets and investment securities with remaining maturities of one year or less. 

Volatile liabilitie -the sum of large denomination time deposits, foreign office deposits, federal funds purchased, securities sold under agreement• to repurchase, 

and other borrowed money. 

FIRST CLASS 

FDIC MAIL

Postage & Federal Deposit Insurance Corporation Fees Paid 

Washington, DC 20429-9990 FDIC 

Permit No. G36 OFFICIAL BUSINESS 

Penalty for Private Use, $300 

Attn: Chief Executive Officer