Third Quarter 1988 

FDIC 

Office of Research 

& Statistics 

John Quinn 

(202) 898-3940 

Ross Waldrop 

(202) 898-3951 

The FDIC 

uarter1Y-_______L_.W_i_llia_m_S_e_id_m_an_,_C_ha_ir_m_an 

anking Profile 

COMMERCIAL BANKING PERFORMANCE -THIRD QUARTER 1988 

• Banks Earn Record $5.9 Billion in Third Quarter 

• Industry Increases Equity Capital By $4.7 Billion 

• Nonperforming Assets Jump $3.2 Billion in Third Quarter 

• Southwest Region Accounts for Majority of "Problem", Failed Banks 

The commercial banking sector continued its 

strong 1988 performance, earning a record $5.9 

billion in the third quarter, $100 million more than 

in the third quarter of 1987, the previous high. 

Profitability was strengthened by higher 

noninterest revenues and improved control of 

overhead expense. For the first nine months of 

the year, commercial banks reported net income 

totaling $18.7 billion, surpassing the previous fullyear record of $18.1 billion recorded in 1985. Net 

operating income was $5.8 billion for the quarter 

and $17.6 billion for the first nine months, both 

record amounts. The recent improvement in earnings performance should continue through the 

rest of the year. Many large banks are expected 

to book interest arrearages on their Brazilian 

loans during the fourth quarter, which will add 

more than $1.5 billion to earnings. 

Chart A - Quarterly Net Income of FDIC-Insured 

s Billions Commercial Banks, 1984-1988 

- 5 

-10 

- 106 

1234 1234 1234 12 34 1 23 

1984 1985 1986 1987 1988 

0Firsl Republic Effect . Securities and Othe, Gains ti1Net Operating Income 

· 1999 amounts are adJusted for effect of First Republic Failures. See Nole. page 2 

Real estate loan growth continued to lead asset 

expansion in the third quarter. Total banking 

assets grew by $39.7 billion, with almost threequarters of the growth representing increases in 

real estate and consumer loans. Home mortgage 

loans and commercial real estate loans each 

grew by over $8 billion. Home equity lines of 

credit accounted for $2.8 billion of real estate 

loan growth, representing an annualized growth 

rate of 31 percent. Commercial and industrial 

loans, while up 2.5 percent from year-earlier 

levels, declined by $4.3 billion in the quarter. Total 

assets grew 5.2 percent on both a year-to-year 

and annualized quarter-to-quarter basis. Year-toyear deposit growth of 4.8 percent failed to keep 

pace with asset expansion, as banks' reliance on 

higher-cost, non-deposit liabilities increased. 

Average loan yields increased, due in part to the 

growing proportion of high-yield consumer and 

real estate loans, but a $3.2 billion increase in 

nonperforming assets in the third quarter limited 

interest income growth. At the same time, the 

shift in funding away from noninterest-bearing 

deposits to interest-bearing deposits and 

nondeposit liabilities contributed to higher interest expense. As a result, net interest margins 

were essentially flat. Noninterest income continued to increase its relative contribution to earnings, accounting for over 14 percent of total gross 

revenues; as recently as 1984, noninterest income represented less than 10 percent of total 

revenues. Sources of noninterest income include 

deposit account and other service charges and 

fees, foreign exchange and bond trading income, 

fees from issuance of letters of credit, and loan 

sales and servicing. Loan sales in particular have 

become an increasingly popular way for banks 

to provide loan services while diversifying their 

risks and affording greater flexibility in balance 

sheet management. While banks in all size 

groups have been aggregate net sellers of loans, 

the dozen largest banks account for over 80 percent of loan sales. The greatest purchasers of 

loans are banks in the $1-to-30 billion size range, 

but most loans are sold to non-bank investors. 

The trend toward increased loan brokering is expected to continue. 

For assistance contact: Section508@fdic.gov
Chart B - Quarterly Loan Sales, of FDIC-Insured 

s a,,,,ons Commercial Banks, 1984-1988 300 

240 

180 . 

120 

1234 1234 1234 1234 123 

1984 1985 1986 1987 1988 

The commercial banking industry's equity capital 

level reached a new high as of September 30, 

growing $4.7 billion in the third quarter. Strong 

earnings, as well as the addition of more than $1 

billion in new capital stock ($737 million of which 

was to capitalize NCNB-Texas National Bank, the 

successor to the First Republic banks) were 

responsible for the improvement. The industry's 

equity capital ratio stood at 6.25 percent of total 

assets at the end of the quarter, its highest level 

since before the extraordinary transfers from 

capital to loss reserves five quarters ago. At the 

same time, many large banks continued to draw 

down the large loan-loss allowances that they 

created last year. Loss allowance coverage of 

noncurrent loans and leases fell in all regions except the Southwest and Midwest. 

Nonperforming assets were 0.8 percent higher 

than a year ago. Compared to a year ago, they 

were a smaller percentage of assets in all regions 

except the Southwest; however, nonperforming 

asset ratios increased from second quarter levels 

everywhere except the Midwest and West. Third 

quarter nonperforming asset growth was greatest 

in the Northeast and Southwest regions. Increases in nonperforming real estate loans and 

other real estate acquired through foreclosure accounted for more than half of the growth in 

nonperforming assets. 

Chart C - Distribution of "Problem" Banks 

Hundreds 1981-1988 of Banks 

16r---------------,.......,:::---, 

14 

12 

Rest of US 10 Rest of Southwest 

~ Texas 

1981 1982 1983 1984 1985 1986 1987 1988 

Midwest banks continued to exhibit signs of 

credit quality improvement. Their level of nonperforming assets declined, even as their loan 

charge-off rate fell. The percentage of Midwest 

banks with earnings losses has remained in the 

single-digit range this year, in contrast to recent 

years. Results for the region as a whole offer no 

evidence of problems from this summer's 

drought. 

Credit-quality problems continued to plague 

banks in the Southwest, especially in Texas. 

More than one in four Southwestern banks lost 

money in the third quarter. Nonperforming asset 

levels continued to increase despite higher net 

charge-off rates, indicating that a number of institutions are still losing ground in their efforts 

to stabilize loss levels. More than half of the 186 

banks that failed or required assistance to avert 

failure in the first nine months of this year were 

Texas banks. Over half of the 1,429 banks on 

FDIC's "Problem" list as of September 30 were 

located in the Southwest region. Southwest 

banks were the only regional group whose third 

quarter profitability was lower than in the same 

period a year ago. 

Chart D - Distribution of Failed/Assisted Banks 

First Three Quarters, 1988 

West 

Texas 20 

100 

Central 

5 

Northeast 

2 

TOTAL= 186 BANKS 

The outlook for the balance of this year remains 

favorable, even though the return to more traditional profitability levels is bypassing Southwest 

banks. A significant portion of this year's earnings, however, will be attributable to the drawdown by large banks of the sizable loss reserves 

established last year, the restoration of interest 

on troubled foreign debt, and nonrecurring gains 

from asset sales. Full-year net income should exceed $23 billion, and aggregate profitability will 

be at its highest level of the last five years. 

NOTE: Quarterly earnings for the banking industry are normally derived by subtracting the reported year-to-date 

results for the prior quarter from those reported for the current quarter. Using this approach, the sum of quarterly earnings will equal the year-to-date total. However, the failure 

in July of 42 banks of First Republicbank Corporation effectively removed $2.3 billion in losses and $641 million 

in negative equity capital from year-to-date aggregates. 

Given the unusual magnitude of these losses, and to avoid 

overstating third quarter earnings, the First Republic banks 

were excluded to arrive at a more accurate portrayal of third 

quarter performance. 

2 
Table I. Selected Indicators, FDIC-Insured Commercial Banks 

1988' 1987' 1987 1986 1985 1984 1983 

Return on assets . , . . ······· ········ ··· ·.. 0.82% 0.02% 0.12% 0.63% 0.70% 0.65% 0.66% 

Return on equity . ...... . ...... .. ......... . 13.38 0.34 2.00 9.94 11.31 10.73 10.70 

Equity capital to assets ....... . ............ 6.25 6.13 6.04 6.20 6.20 6.15 6.00 

Primary capital ratio .. .. .. .. . . . .. ....... ... 7.84 7.75 7.70 7.22 6.91 6.91 6.59 

Nonperforming assets to assets .. ... . ... . .. . 2.47 2.58 2.46 1.94 1.87 1.97 1.97 

Net charge-offs to loans . ... .. .............. 0.91 0.80 0.92 0.98 0.84 0.76 0.67 

Asset growth rate .. .. ............ . ... .. . .. 5.18 5.03 2.03 7.71 8.86 7.11 6.75 

Net operating income growth ... ....... ... .. N/M N/M -85.27 -20.65 6.30 3.40 -3.69 

Percentage of unprofitable banks .......... . . 13.30 16.86 17.66 19.79 17.09 13.06 10.58 

Number of problem banks ............ ...... 1,429 1,591 1,559 1,457 1,098 800 603 

Number of failed/assisted banks ............. 186 151 201 144 118 78 45 

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

(dollar figures in millions) 

Preliminary 

3rd Qtr 2nd Qtr 3rd Qtr 3⁄4Change 

1988 1988 1987 87:3-88:3 

Number of banks reporting ................. . ... ..... . ... . .... . .. . 13,239 13,411 13,851 -4.4 

Total employees (full-time equivalent) .. ...... . . . . . ..... . . ...... .... . 1,528,627 1,536,440 1,554,143 -1.6 

CONDITION DATA 

Total assets ..... ... .. ..... .. .. ... .. .... .... .. ..... .. . . ..... .. . $3,094,988 $3,055,286 $2,942,641 5.2 

Real estate loans ................ .... . .. .............. ... .. . 657,338 637,795 579,034 13.5 

Commercial & industrial loans ....•..... . .. .... ............... 595,150 599,452 580,394 2.5 

Loans to individuals . . ....... . . ... ................ . . .. .... . . . 367,374 358,217 341 ,834 7.5 

Farm loans .... . .. .. .. .. . .. .............. . . .. .. . .... .. . ... . 31,130 30,686 31 ,045 0.3 

Other loans and leases ........ ...... . . . .... ..... .. ......... . 251,100 256,598 265,805 -5.5 

Total loans and leases .... . ... . .. ......... . .... ..... . .... . .. . 1,002,182 1,882,749 1,798,112 5.8 

LESS: Reserve for losses .... .. ........... .. . . ... . ........ . . . 49,171 49,247 47,411 3.7 

Net loans and leases . . .. ......... . ..... . . .. . ........ ... .. .. .. . 1,853,011 1,833,503 1,750,701 5.8 

Temporary investments ... .. .. ........... . .. . ............ .. ... . 472,400 467,678 446,338 5.8 

Securities over 1 year ... .......................••.•.. .. ....... 393,662 387,662 387,395 1.6 

All other assets ....... ..... . . ... ...... ............ . ......... . 375,915 366,444 358,207 4.9 

Total liabilities and capital ... .. ........................•.......... $3,094,988 $3,055,286 $2,942,641 5.2 

Noninterest-bearing deposits . ........ .. ...... .. .. ... ......... . . . 451 ,199 462,958 450,382 0.2 

Interest-bearing deposits ..... . . ... ..... . ................•...... 1,924,198 1,892,791 1,816,232 5.9 

Other borrowed funds ..... .. ..... . . . .... . .. ..... .. .. .... ..... . 403,819 391,070 367,419 9.9 

Subordinated debt ........ .. ................... ... . . .. . .. . ... . 17,197 17,207 17,433 -1 .4 

All other liabilities .... . . .. .. . ........ . . ..... . . . . .... ... .... . . . 105,229 103,298 110,775 -5.0 

Equity capital ........... . ....... ..... .. .. ... ... .... ...... . .. . 193,346 188,012 180,399 7.2 

Primary capital ........ .... .. ............ . ............ .... .. . .. . 246,136 241,079 231,478 6.3 

Nonperforming assets ......... .............. . .................. . 76,530 73,367 75,001 0.8 

Loan commitments and letters of credit ...... •. . ........... . ....... 819,002 812,740 773,627 5.9 

Domestic office assets .............. .. ...... ...... .... .. . . ..... . 2,678,870 2,637,865 2,519,000 6.3 

Foreign office assets .............. . . ..... ....... . . . ............ . 416,119 417,421 423,642 -1.8 

Domestic office deposits .......... . ............. . . ........ . .... . . 2,047,035 2,026,577 1,922,216 6.5 

Foreign office deposits ..... . ...... ............ ...... . . ..... . ... . 328,362 329,122 344,398 -4.7 

Earning assets ....... . . ... .. . . . ............ .... ... ........ .... . 2,719,056 2,688,843 2,584,434 5.2 

Volatile liabilities ........ . . ... .......... .. .... . . ...... ... . .. . . . . 1,101,438 1,070,628 1,039,873 5.9 

Preliminary First First Preliminary 

INCOME DATA Three Quarters Three Quarters 3rd Qtr 3rd Qtr 

1988 1987 3⁄4Change 1988" 1987 % Change 

Total interest income . ........... . ......... $197,479 $180,423 9.5 $69,313 $61,761 12.2 

Total interest expense ............. .... ' .. 119,697 106,418 12.5 42,641 36,508 16.8 

Net interest income ........ .... ..... .. . 77,782 74,005 5.1 26,672 25,252 5.6 

Provisions for loan losses ...... . .......... 11,579 29,249 -60.4 4,395 3,874 13.4 

Total noninterest income ... . . . ... . ........ 33,338 29,422 13.3 11,383 10,366 9.8 

Total noninterest expense ... ..... . .. ..... . 74,537 71,245 4.6 25,281 24,194 4.5 

Applicable income taxes ........ .. ........ 7,411 4,044 83.3 2,593 2,035 27.4 

Net operating income ............ .. .. . . . 17,593 -1,112 N/M 5,786 5,516 21 .5 

Securities gains, net .. . .. . .. . . ..... ....... 517 1,395 -62.9 -18 264 NIM 

Extraordinary gains, net .................. . 611 181 237.6 175 69 153.6 

Net income .............. . . ... . ... .... . 18,721 464 3,934.7 5,943 5,849 1.6 

Net charge-o ffs . . . . . . . . . . . . . . . . . . . . . . . . ' . 12,727 10,647 19.5 4,225 3,698 14.3 

Net additions to capital stock ..... .. ...... . 1,388 1,114 24.6 1,071 371 188.7 

Cash dividends on capital stock . ........... 9,117 6,969 30.8 2,866 2,279 25.8 

• through September 30; ratios annualized where appropriate 

*' Adjusted for effect of First Republic failures - See Note, Page 2. 

N/M-Not meaningful 

3 
Table Ill. Third Quarter Bank Data* (Dollar figures in billions, ratios in %) 

Asset Size Distribution Geographic Distribution 

EAST WEST Less $100 Million Greater 

than $100 to $1-10 than $10 Northeast Southeast Central Midwest Southwest West 

All Banks Million $1 Billion Billion Billion Region Region Region Region Region Regior. 

CURRENT QUARTER Preliminary 

(The way it is . . . ) 

Number of banks reporting ... ... . .. .. . . . 13,239 10,464 2,410 328 37 1,085 1,931 2,945 3,130 2,630 1,518 

Total assets . . . . . . . . . . . . . . . . .. . . . . . . . . $3,095.0 $380.3 $576.5 $998.0 $1,140.2 $1,243.6 $424.1 $494.3 $207.0 $262.4 $463.6 

Total deposits . .. . ... .. ... . . ..... .. . ... 2,375.3 337.7 492.0 745.0 800.6 888.6 338.3 397.7 160.8 218.8 371 .1 

Net income (in millions) .. ..... ........... . $5,943 629 1,009 1,674 2,631 3,001 1,040 1,295 530 -1,035 1,112 

Percentage of banks losing money ...... . 12.8% 14.1% 8.5% 6.4% 2.7% 6.6% 9.9% 4.9% 8.0% 28.5% 19.0% 

Perfonnance ratios (annualized) 

Yield on earning assets . . ....... . . . ..... 10.25% 10.04% 10.30% 10.27% 10.80% 10.82% 10.21 % 9.83% 10.36% 10.10% 10.51% 

Cost of funding earning assets ..... . .... . 6.31 5.48 5.68 5.95 7.56 7.31 5.80 5.90 5.93 6.16 5.47 

Net interest margin . . . . . . . . .. . . . . . . . . . . 3.94 4.56 4.61 4.33 3.25 3.51 4.41 3.93 4.43 3.93 5.03 

Net noninterest expense to earning assets . 2.06 2.82 2.68 2.26 1.36 1.57 2.46 2.06 2.15 3.12 2.61 

Net operating cash flow to assets .. .. ... . 1.66 1.58 1.74 1.82 1.60 1.69 1.72 1.67 2.04 0.71 2.05 

Net operating income to assets .......... 0.75 0.73 0.73 0.68 0.91 0.95 1.03 1.05 1.02 -1 .66 0.91 

Return on assets .. .. . . . ... . .. . . ...... 0.77 0.74 0.72 0.68 0.97 0.97 1.04 1.06 1.04 - 1.66 0.97 

Return on equity ..... . . . .. . . . .. . ..... . 12.47 8.33 9.72 10.96 20.08 17.18 14.77 15.62 13.72 -26.35 16.74 

Net charge-offs to loans and leases . .. . . . 0.89 1.09 0.82 0.90 0.96 0.86 0.69 0.57 1.11 2.63 0.86 

Loan loss provision to net charge-offs ..... 104.0 93.85 133.48 134.90 58.61 70.38 91 .52 93.33 101.86 161.29 108.30 

Condition Ratios 

Loss allowance to: 

Loans and leases .. . ................ . 2.58% 1.67% 1.59% 1.78% 4.05% 2.88% 1.32% 2.04% 1.96% 4.40% 2.82% 

Noncurrent loans and leases ....... . .. . 76.98 66.55 110.36 86.15 75.63 77.14 97.90 112.35 86.12 51 .86 79.23 

Nonperforming assets to assets . . . .. . . . . 2.47 2.05 1.83 1.60 3.63 2.39 1.07 1.23 1.67 7.04 2.91 

Equity capital ratio . ... . . . .. . . . . . ... .. . 6.25 8.94 7.34 6.22 4.81 5.74 7.09 6.83 7.63 5.73 5.87 

Primary capital ratio ....... . ....... . .... 7.84 9.80 8.24 7.30 7.75 7.65 7.81 8.00 8.70 7.84 7.80 

Net loans and leases to deposits .... ... . . 78.02 58.97 70.54 85.22 83.90 83.32 77.77 73.10 72.54 63.47 81.67 

Growth Rates (year-to-year) 

Assets ........... ... . . ......... . .. . .. 5.2% 6.8% 12.5% 15.3% 2.6% 6.9% 9.0% 6.1% 2.5% -6.1% 4.7% 

Equity capital .......... . . .. ..... . . .. .. 7.2 4.4 9.0 11 .7 14.3 13.4 9.8 6.7 2.6 -16.7 9.2 

Net interest income . .. .. .. . . . . . . .. . . . .. 5.6 9.8 14.2 16.0 1.2 2.5 7.3 6.6 4.8 -19.1 7.3 

Net income . .. . .... .. .. ..... . ... ..... . 1.6 16.4 -8.7 -9.0 15.2 9.0 2.8 21 .1 4.9 NIM 29.3 

Nonperforming assets . ... .... .. . .. . . ... 0.8 0.5 13.7 7.4 -4.9 1.5 3.6 -5.9 -15.7 20.7 -13.9 

Net charge-offs ......... . . .. . . . . . .. .... 14.3 22.1 31 .0 32.6 29.9 55.9 40.0 0.9 -17.8 -95.0 -5.9 

Loan loss provision ....... .... .. ... ... . 13.4 4.6 43.6 55.4 -5.2 -4.4 13.2 -6.5 -5.3 NIM 22.6 

PRIOR THIRD QUARTERS 

(The way it was . .. ) 

Return on assets ....... . .... .. ... 1987 0.79 0.63% 0.75% 0.82% 0.85% 0.94% 1.05% 0.92% 0.99% -0.47% 0.76% 

...... . . . .. .. . . .. 1985 0.77 0.86 0.90 0.90 0.58 0.80 1.13 0.86 0.83 0.55 0.54 

.. .. .. ........ . .. 1983 0.65 1.03 0.84 0.68 0.37 0.67 0.99 0.72 0.99 0.29 0.47 

Equity capital ratio . . .. ... . .. ... . . 1987 6.13 8.77 7.48 6.26 4.34 5.42 7.05 6.79 7.62 6.45 5.63 

... .... . . .. . . . .. .1985 6.32 8.76 7.30 6.04 4.90 5.66 6.91 6.96 7.68 7.17 5.61 

... .. . .. ....... . .1983 6.11 8.77 7.20 5.76 4.41 5.33 6.94 6.73 7.75 6.99 5.27 

Nonperforming assets to assets .... 1987 2.58 2.27 2.00 1.87 3.53 2.52 1.14 1.39 2.04 5.49 3.55 

.... . . . .......... 1985 2.07 2.19 1.77 1.66 2.55 1.83 1.10 1.62 2.45 2.83 3.07 

. ... . . . . ... .... . . 1983 2.1 7 1.65 1.67 2.05 2.79 1.72 1.24 2.23 1.68 2.34 3.72 

Net charge-offs to loans and leases . 1987 0.83 1.06 0.88 0.83 0.76 0.58 0.57 0.61 1.44 2.18 0.96 

........ . . ..... . . 1985 0.82 1.19 0.83 0.71 0.80 0.49 0.53 0.63 1.59 1.37 1.29 

... . .... . .. .. . .. .1983 0.66 0.60 0.61 0.68 0.71 0.36 0.48 0.59 0.57 1.85 0.77 

• All income adjusted for effect of First Republic failures; See Note, Page 2. 

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 

4 
Table IV. First Three Quarters 1988 Bank Data (Dollar figures in billions, ratios in %) 

Asset Size Distribution Geographic Distribution 

EAST WEST Less $100 Million Greater 

than $100 to $1-10 than $10 Northeast Southeast Central Midwest Southwest West 

All Banks Million $1 Billion Billion Billion Region Region Region Region Region Region FIRST THREE QUARTERS PRELIMINARY 

(The way it is ... ) 

Number of banks reporting . .. . . . . . ...... 13,239 10,464 2,410 328 37 1,085 1,931 2,945 3,130 2,630 1,518 

Net Income (in millions) . $18,721 $2,124 $3,289 $5,565 $7,743 $8,762 $3,116 $3,891 $1 ,607 -$1,499 $2,844 

Percentage of banks losing money .. . . . .. 13.3% 14.7% 7.6% 7.0% 5.4% 9.5% 11 .8% 4.1% 6.9% 29.0% 20.0% 

Perfonnance ratios (annualized) 

Yield on earning assets . . ... . . .... ...... 9.84% 9.78% 9.90% 9.87% 10.32% 10.32% 9.87% 9.54% 10.11 % 9.56% 10.11% 

Cost of funding earning assets . . .. . ... .. . 5.96 5.34 5.46 5.63 7.05 6.81 5.57 5.66 5.73 5.84 5.27 

Net interest margin . . . . . . . . . . . . . . . . . . . . 3.88 4.43 4.44 4.24 3.27 3.52 4.30 3.89 4.37 3.72 4.84 

Net noninterest expense 

to earning assets . .... . ....... .... ... 2.05 2.77 2.63 2.25 1.41 1.61 2.43 2.02 2.07 2.88 2.71 

Net operating cash flow to assets .. ...... 1.60 1.51 1.63 1.75 1.58 1.65 1.66 1.67 2.06 0.74 1.81 

Net operating income to assets ..... . .... 0.77 0.74 0.78 0.75 0.87 0.90 0.99 1.05 103 -0.83 0.78 

Return on assets . . . . . . . . . . . . . . ....... 0.82 0.77 0.80 0.78 0.95 0.97 1.03 1.08 1.06 -0.79 0.85 

Return on equity .................. . ... 13.38 8.79 10.85 12.45 20.45 17.32 14.80 16.08 14.06 -12.33 14.65 

Net charge-offs to loans and leases . . . . . . 0.91 0.83 0.75 1.03 0.92 0.73 0.65 0.69 1.30 2.66 0.97 

Loan loss provision to net charge-offs .. .. . 90.18 107.11 119.32 10109 63.98 85.07 94.94 81 .29 90.25 101 .81 90.87 

Growth Rates (year to year) 

Net interest income .. ... .. .. . ...... . . . . 5.1% 5.9% 11 .0% 14.5% 3.2% 7.7% 6.3% 6.6% 4.7% -10.5% 5.1% 

Net income ... ... .. . .... . ... .. .. ..... . 3,934.7 11 .1 4.3 40.2 NIM NIM 11 .2 157.1 61.2 NIM NIM 

Net charge-offs .. .. . .... .. . ..... .. .... . 19.5 -5.3 19.7 62.7 21 .3 36.0 38.8 38.6 -5.4 15.1 -1 .9 

Loan loss provision . ........ . .. .... ... . -60.4 -13.6 8.6 -8.9 -83.9 -76.4 -13.4 -61 .3 -38.8 -12.2 -62.4 

PRIOR FIRST THREE QUARTERS 

(The way it was ... ) 

Return on assets .............. . .. 1987 0.02 0.67% 0.73% 0.59% -1 .04% -0.39% 0.99% 0.44% 0.66% -0.47% -0.16% 

. .. ... ... . . .. .... 1985 0.76 0.89 0.92 0.89 0.52 0.80 1.12 0.85 0.85 0.63 0.40 

. . . . ... . .. . .. .. .. 1983 0.72 1.14 0.92 0.63 0.49 0.69 1.04 0.75 1.07 0.73 0.43 

Net charge-offs to loans and leases . 1987 0.80 1.02 0.82 0.76 0.79 0.58 0.53 0.54 1.43 1 93 1.00 

.. . .... . .. . . . . .. .1985 0.71 1.03 0.68 0.61 0.71 0.43 0.48 0.58 1.38 1.15 1.07 

. .. . . ..... 1983 0.60 0.62 0.56 0.70 0.56 0.37 0.49 0.63 0.54 1.26 0.71 

NOTES TO USERS 

COMPUTATION METHODOLOGY FOR PERFORMANCE AND CONDITION RATIOS 

All income figures used in calculating perfonnance ratios represent amounts for that period, annualized (multiplied by the number of periods in a year). 

All asset and liability figures used in calculating perfonnance ratios represent average amounts for the period (beginning-of-period amount plus end-of-period amount plus any 

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

All asset and liability figures used in calculating the condition ratios represent amounts as of the end of the quarter. 

DEFINITIONS 

"Problem" Banks-Federal regulators assign to each financial institution a unifonn composite rating , based upon an evaluation of financial and operational criteria. The rating 

is based on a scale of 1 to 5 in ascending order of supervisory concern. "Problem" banks are those institutions with financial , operational or managerial weaknesses that threaten 

their continued financial viability. Depending upon the degree of risk and supervisory concern, they are rated either "4" or "5". 

Earning Assets-all loans and other investments that earn interest, dividend or fee income. 

Yield on Earning Assets-total interest, dividend and fee income earned on loans and investments as a percentage of average earning assets. 

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

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

Net Noninterest Expense-total noninterest expense, excluding the expense of providing for loan losses, less total noninterest income. A measure of banks' overhead costs. 

Net Operating Income-income after taxes and before gains (or losses) from securities transactions and from nonrecurring items. The profit earned on banks' regular banking business. 

Net Operating Cash Flow-pre-tax net operating income before the provision for loan and lease losses; a measurement of banks' cash flow, net of interest and overhead expenses, 

from regular operations. Previously referred to as "adjusted net operating income". 

Return on Assets-net income (including securities transactions and nonrecurring items) as a percentage of average total assets. The basic yardstick of bank profitability. 

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

Net Charge-offs-total loans and leases charged off (removed from balance sheet because of uncollectibility) during the quarter, less amounts recovered on loans and leases 

previously charged off. 

Nonperforming Assets- the sum of loans past-due 90 days or more, loans in nonaccrual status, and noninvestrnent real estate owned other than bank premises. 

Noncurrent Loans & Leases-the sum of loans past-due 90 days or more and loans in nonaccrual status. 

Primary Capital-total equity capital plus the allowance for loan and lease losses plus minority interests in consolidated subsidiaries plus qualifying mandatory convertible debt 

(cannot exceed 20 percent of total primary capital), less intangible assets except purchased mortgage servicing rights. 

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

Temporary Investments-the sum of interest-bearing balances due from depository institutions, federal funds sold and resold , trading-account assets and investment securities 

with remaining maturities of one year or less. 

Volatile Liabilities-the sum of large denomination time deposits, foreign office deposits, federal funds purchased, and other borrowed money. 

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

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

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