·

The FDIC 

uarterlY-______L_._W_illi_am_S_e_id_m_an_,C_h_air_m_an 

First Quarter 1989 

) 

FDIC 

QI'' - - of Research 

'ics 

J, lnn 

(202) 898-3940 

Ross Waldrop 

(202) 898-3951 

anking Profile 

COMMERCIAL BANKING PERFORMANCE - FIRST QUARTER, 1989 

• Earnings of $7.3 Billion Mark Third Consecutive Record Quarter 

• Profits Improve Across Size Groups 

• Gains Most Evident Among Banks West of the Mississippi 

• Equity Capital Surpasses $200 Billion Level 

• Numbers of Unprofitable and Problem Banks Continue to Decline 

Commercial banks earned a record $7.3 billion 

during the first quarter of 1989, up from $4.9 

billion in the first quarter of 1988, and $6.7 billion 

in the fourth quarter of 1988, the previous high. 

This was the third straight quarter that the U.S. 

commercial banking industry established a new 

earnings mark. Aggregate return on assets was 

0.94 percent, compared to 0.66 percent in the 

first quarter a year ago. The record profits consisted almost entirely of earnings from regular 

operations. Gains from the sale of investment 

securities and other nonrecurring items were at 

their lowest level since fourth quarter 1987. Net 

operating income was $7.2 billion, also a quarterly record, compared to $4.2 billion in the first 

quarter a year ago and $6.3 billion in the final 

quarter of 1988. The improvement in profitability was broadly based, with all asset size groups 

reporting higher returns on assets than a year 

ago. 

Chart A-Quarterly Net Income of 

FDIC-Insured Commercial Banks, 1985-1989 

$ Billions 

: 

8 

Hit 1111 ., l1illl,I 

73 

- 4 

- 8 

- 12 _________-_10~· - - ----- 123 4 1 23 4 1 23 4 1 234 

1985 1986 1987 1988 1989 

mm Net Operating Income ■ Securities and Other Gains □ First Republic Effect 

Chart 8-Quarterly Net Interest Margins 

1983-1989 

Net Interest Margin (%) 

5.0 

4.5 

4.0 

1983 1984 1985 1986 1987 1988 1989 

Wider net interest margins, stronger cost controls, and lower loan-loss expenses all contributed to the first quarter's record results. 

Interest rate levels were markedly higher in the 

first quarter than a year earlier. Interest expense 

growth of 23.0 percent was offset by a 17.8 percent increase in interest income, so that net interest income was 9.9 percent higher than in the 

first quarter of 1988. The industry's net interest 

margin widened to 4.08 percent, compared to 

3.86 percent in the first quarter of 1988. Small 

banks in particular benefited in the rising rate 

environment, as their aggregate net interest 

margin widened by 25 basis points over first 

quarter 1988 to 4.57 percent. Larger banks also 

reported strong margins, although they were narrower than in the fourth quarter of 1988, when 

nearly $3 billion of accumulated interest was 

received on Brazilian debt. 

Efforts to streamline operations continue to be 

evident in the aggregate data, as noninterest 

For assistance contact: Section508@fdic.gov
expense grew only 3.6 percent, while assets 

grew 4.4 percent. Both the numbers of banks 

and bank employees continued to decline during the first quarter, while the number of banking offices increased. The number of insured 

commercial banks operating at the end of the 

first quarter was the fewest in FDIC history, and 

the number of employees reached its lowest 

level since 1984. Efficiency gains in commercial 

bank operations have been significant over the 

past two years, and the average net operating 

cash flow per employee has nearly doubled over 

the past five years. 

Chart C-Net Operating Cash Flow Per Employee 

1984-1989 

$ Thousands 

10 

1984 1985 1986 1987 1988 1989 

Provisions for loan and lease losses were $1 .1 

billion lower in the first quarter than in the yearearlier period, a 23.9 percent reduction. This improvement was mainly attributable to the 

Southwest region, where the decline was so 

great that it more than compensated for increases in four of the other five regions , and to 

the largest banks, which continued to cover loan 

charge-offs from the large reserves established 

in 1987. The drop in the Southwest region's loss 

provision was mostly the result of the number 

of troubled banks that were closed or assisted 

during the previous twelve months. Nationwide, 

equity capital growth outweighed the shrinkage 

in the reserve for loan and lease losses, and the 

industry's primary capital ratio rose to 7.99 

percent. 

Equity capital ratios improved in every size 

group and region in the first quarter. The FDIC's 

activity dealing with troubled and failing bank 

cases in the Southwest has strengthened that 

region's equity capital base. As of March 31, the 

Southwest's equity capital ratio stood at 5.87 

percent of assets, up from 5.40 percent on 

March 31, 1988. Nationally, the banking sector's 

capital base grew $5.2 billion in the first three 

months of 1989, reaching $202 billion, and the 

aggregate equity capital ratio climbed to 6.41 

percent, the highest level of the decade. The 

portion of earnings paid out in cash dividends 

was considerably lower than in 1988, except at 

the largest banks. Retained earnings were more 

than twice the amount of a year ago, significantly boosting banks' internally generated equity 

capital. 

As noted, the improvement in profits was 

widespread, with first quarter earnings up for 

every size group and all regions except the 

Northeast. Nearly two-thirds of commercial 

banks reported higher earnings in the first 

quarter of 1989 than in the first quarter of 1988. 

Only 8.78 percent of banks were unprofitable in 

the quarter, compared to 13.08 percent in the 

first quarter of 1988. Significant improvement 

was evident in virtually all states west of the 

Mississippi, as net income grew strongly and 

nonperforming asset levels declined compared 

to year earlier levels. These developments were 

in contrast to the lower income growth and 

slightly higher nonperforming asset levels in 

the east, where state performance trends were 

more varied. Despite some narrowing of the performance gap, banks in the east continue to 

outperform banks in the west. 

Real estate loans outstanding rose by $18.4 

billion during the first quarter, as banks continue to look to real estate lending to fuel asset 

growth. Increases in commercial loans offset 

declines in loans to individuals. Responding to 

the flatter yield curve, banks also increased 

their temporary investments by $18.5 billion in 

the first quarter. Nonperforming assets , 

although 6.5 percent lower than year-earlier 

levels, rose $2.9 billion during the first three 

months of the year. Banks reporting an increase 

in nonperforming assets during the quarter 

slightly outnumbered those reporting 

decreases. 

Chart 0-Commercial Bank Loan Growth 

1984-1989 % Growth 

100,------------,---------::;;;;;i 

80 

60 

1984 1985 1986 1987 1988 1989 

The number of commercial banks on the FDIC 

"Problem List" fell by 105 during the first three 

months of the year to 1,298, the lowest level in 

three years. Banks failed at a somewhat greater 

rate than anticipated during the first quarter, 

with 64 having failed or received assistance, 20 

of them MCorp banks; 54 banks failed or were 

assisted in the first quarter of 1988. The balance 

of the year should see a moderation of this 

trend, however, and the 1989 full-year total 

should show the first year-to-year decline since 

1981. 

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

1989' 1988' 1988 1987 1986 1985 

Return on assets . . . . .. . . .. ... .. . . . ...... . 0.94% 0.66% 0.83% 0.10% 0.63% 0.70% 

Return on equity . . .. ..... . . . .. .. ...... . .. . 14.70 10.92 13.43 1.54 9.99 11.15 

Equity capital to assets .... .. ... . . . .. . .... . 6.41 6.07 6.28 6.02 6.19 6.19 

Primary capital ratio . . . . ... ...... ...... . . . . 7.99 7.83 7.85 7.76 7.55 7.42 

Nonperforming assets to assets ...... .. ... . . 2.22 2.48 2.14 2.46 1.95 1.46 

Net charge-offs to loans . ....... ... ..... ... . 0.72 0.88 0.99 0.93 0.99 0.84 

Asset growth rate . ......... . . ... .... . . . .. . 4.41 4.04 4.36 2.03 7.71 8.86 

Net operating income growth . .... .. ....... . 63.72 1.54 2018.29 -85.27 -20.65 6.30 

Percentage of unprofitable banks ........... . 8.78 13.08 14.24 18.62 20.65 17.10 

Number of problem banks . ..... . ...... . ... . 1,289 1,491 1,394 1,559 1,457 1,098 

Number of failed/assisted banks .. .... . . .. . . . 64 54 221 201 144 118 

' Through March 31 ; ratios annualized where appropriate 

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

(dollar figures in millions) 

Preliminary 

1st Qtr 4th Qtr 1st Qtr 

1989 1988 1988 

Number of banks reporting . ..... ......... .. .. . . .. . ..... . . . ...... . 13,001 13,121 13,541 

Total employees (full-time equivalent) . . .. ...... . . . .. .. ... . . ... . . ... . 1,526,079 1,527,048 1,530,746 

CONDITION DATA 

Total assets .................. . ... . .. .. . .... . .. ..... . . . ..... . . . $3,150,670 $3,130,750 $3,017,506 

Real estate loans .............. . .. .. . .. . ....... ... . ........ . 695,024 676,612 615,588 

Commercial & industrial loans ... . . . .......... . .......... . ... . 604,297 598,755 595,872 

Loans to individuals .. . ...... . . . . . .... .... .. . . . ............. . 371 ,483 377,828 350,831 

Farm loans .................... .. . . ...•• ••. . ........ . . . . . . . 28,729 30,222 28,607 

Other loans and leases .. . . .. .. . .. . . .. . .. .. . . . .. . ........... . 247,434 248,891 257,854 

Total loans and leases . . ... .. ............. . . .... ... .. .. . .... . 1,946,967 1,932,308 1,848,752 

LESS: Reserve for losses ....... . .. ... . ..... ..... .. .. . . . .... . 45,871 46,650 50,304 

Net loans and leases .......... . ..... .. . . .............. . . ... . . . 1,901,096 1,885,658 1,798,448 

Temporary investments .. .. . ... ....... ... .... . ..... . .. .... .. . . . 484,316 465,811 472,296 

Securities over 1 year ... ..... . . .... . . ... . .... .. ..... .. .. . .. . . . 386,516 382,m 392,794 

All other assets ....... . ..... . ..... . . .. .................. ... •. 378,761 396,504 353,969 

Total liabilities and capital ...... . .. . ..... . .. . .... . . .... .. .... . . .. . $3,150,670 $3,130,750 $3,017,506 

Noninterest-bearing deposits .. . ....... .... ... . . . . .. . .... . .•..... 440,208 479,429 438,900 

Interest-bearing deposits ....... ... . . ......... . .... ... .. .. .. . . . . 1,988,409 1,952,142 1,880,154 

Other borrowed funds ..... .. ......... . .. ..... . .. .... . .. . . .... . 399,327 380,684 394,079 

Subordinated debt ... . ........... . .............. . . . ... .. .. ... . 17,349 17,309 17,505 

All other liabilities ...... . ..........•.. . ... ... .. . . .. .. . . . . . .... 103,404 104,464 103,834 

Equity capital ... .......... ..... . ... ........... . .... .... . . ... . 201 ,972 196,721 183,035 

Primary capital . . .... ....... ....... . ... . .... ... .. . . . . .. .. . . .... . 251,696 246,812 237,180 

Nonperforming assets ............... . ... . . . .......... .. ........ . 69,991 67,065 74,872 

Loan commitments and letters of credit .... . ..... . ........ . .. . .... . 835,284 839,393 802,356 

Domestic office assets . .. .. . ... . .. . .. . . ... . . . . . .. . .... .... . .... . 2,735,437 2,726,123 2,584,376 

Foreign office assets . ..... ... . ... .. . .. ..... . .......... . ........ . 415,233 404,627 433,130 

Domestic office deposits ...... . . ... ... . . . ....... .. .. . ....••. .. ..·. 2,103,765 2,116,492 1,985,327 

Foreign office deposits .... . .. .. •.... . ...... . .... . .... . ...... .. . . 324,852 315,079 333,727 

Earning assets ......... .. . .•... .. ................ . .. ... ........ 2,771 ,909 2,734,246 2,663,537 

Volatile liabilities ...... . . .. ..• .. ..... . . . .... . ...... .... ...... . .. 1,116,070 1,073,656 1,077,553 

Preliminary 

INCOME DATA Full Year Full Year 1st Qtr 1st Qtr 

1988 1987 %Change 1989 1988 

Total interest income .... . . .. . . ... . .. . . .... $272,279 $244,837 11 .2 $75,528 $64,103 

Total interest expense ...... ...... .... .... 165,013 144,949 13.8 47,504 38,615 

Net interest income ................ ... . 107,266 99,888 7.4 28,024 25,487 

Provisions for loan losses . . ... ..... . . . . .. . 16,965 37,505 -54.8 3,592 4,715 

Total noninterest income .......... . . . .•... 44,932 41,468 8.3 11 ,735 11,056 

Total noninterest expense ..... .. . . ... .. .. . 101,280 97,303 4.1 25,929 25,035 

Applicable income taxes ...... ..... .. ... .. 10,012 5,417 84.8 2,993 2,369 

Net operating income .. .. . . . ... ... . .... . 23,942 1,130 2018.3 7,245 4,426 

Securities gains, net .. .. ................ . . 286 1,427 -80.0 52 390 

Extraordinary gains, net . . . ...... .. . ... . ... 832 204 308.5 30 132 

Net income .. .. . . .... . .... .. ....... . .. . 25,060 2,761 807.5 7,327 4,948 

Net charge-offs .. . .. . . .. .... . .... . . ...... 18,468 16,430 12.4 3,489 4,045 

Net additions to capital stock . . . ... .... . .. . 3,181 2,613 21 .7 197 156 

Cash dividends on capital stock . ... ... ' . ... 13,210 10,666 23.8 3,175 3,199 

1984 

0.64% 

10.48 

6.14 

7.20 

1.60 

0.75 

7.11 

3.40 

14.05 

800 

78 

%Change 

88:UJ9:1 

-4.0 

-0.3 

4.4 

12.9 

1.4 

6.2 

1.2 

-4.0 

5.3 

-8.8 

5.7 

2.5 

-1.6 

7.0 

4.4 

0.3 

5.8 

1.3 

-0.9 

--0.4 

10.3 

6.1 

-6.5 

4.1 

5.8 

-4.1 

6.0 

-2.7 

4.1 

3.6 

% Change 

17.8 

23.0 

9.9 

-23.8 

6.1 

3.6 

26.3 

63.7 

-86.7 

-77.7 

48.1 

- 13.8 

26.6 

-0.7 

3 
Table Ill. First 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 

All Banks Million $1 Billion Billion Billion Region Region Region Region Region fi. - CURRENT QUARTER Preliminary 

(The way it is ... ) 

Number of banks reporting ... . . .. .. . . ... 13,001 10,182 2,448 329 42 1,091 1,941 2,905 3,078 2,491 1,495 

Total assets .. . . ... . . .... . . .. .. . . .. ... $3,150.67 $375.14 $578.97 $987.22 $1,209.34 $1 ,261 .69 $448.30 $506.00 $202.73 $258.54 $473.41 

Total deposits .... . ..... . ... . . . . . . .. ... 2,428.62 333.74 496.62 741 .92 856.33 903.52 358.64 407.99 163.13 219.10 376.23 

Net income /in millions) . . . .... ... .. . . .. .. . 7,327 887 1,427 2,314 2,699 2,733 1,097 1,393 624 119 1,362 

Percentage of banks losing money . . ... . . 8.8% 9.9% 4.4% 5.2% 4.8% 7.6% 8.0% 3.3% 5.2% 18.6% 12.4% 

Performance ratios (annualized) 

Yield on earning assets .... .. ...... . .. .. 11 .00% 10.32% 10.60% 10.84% 1Ui7% 11.58% 10.63% 10.41% 10.65% 9.80% 11 .23% 

Cost of funding earning assets .... . . . . . . . 6.92 5.75 5.96 6.51 8.14 7.96 6.33 6.40 6.19 6.22 5.95 

Net interest margin . . . . .. . . . ... . . . . ... . 4.08 4.57 4.63 4.32 3.42 3.63 4.30 4.01 4.46 3.58 5.27 

Net noninterest expense to earning assets . 2.07 2.75 2.63 2.23 1.41 1.66 2.40 2.11 1.92 2.34 2.70 

Net operating cash flow to assets . . . .. .. . 1.77 1.66 1.81 1.85 1.71 1.72 1.68 1.69 2.27 1.05 2.21 

Net operating income to assets . . . . ... ... 0.92 0.93 0.97 0.91 0.91 0.90 0.98 1.09 1.16 0.17 1.05 

Return on assets . . . . . .. . ....... . . . .... 0.94 0.95 0.99 0.94 0.90 0.87 0.99 1.10 1.21 0.18 1.16 

Return on equity . . . . . . . . . . . . . . . . . . . . . . 14.70 10.67 13.28 14.89 17.73 14.65 14.19 16.15 15.81 3.14 19.20 

Net charge-offs to loans and leases . ... . .. 0.72 0.53 0.59 0.81 0.76 0.61 0.43 0.61 0.95 1.66 0.88 

Loan loss provision to net charge-offs . .... 102.95 127.66 126.33 109.48 83.52 103.68 145.98 91 .32 116.29 88.02 97.54 

Condition Ratios 

Loss allowance to: 

Loans and leases .. .. .. .. . . .... . .... . 2.36% 1.68% 1.58% 1.70% 3.48% 2.80% 1.31% 1.94% 1.98% 2.54% 2.63% 

Noncurrent loans and leases ... . . ... ... 78.19 71 .68 78.23 90.88 74.60 74.32 105.24 108.91 93.55 43.96 85.81 

Nonperforming assets to assets . . .. . . .. .. 2.22 1.92 1.71 1.51 3.14 2.46 1.12 1.21 1.61 4.74 2.59 

Equity capital ratio . .. . .. . .. .. . . . . .. . ... 6.41 8.94 7.52 6.40 5.10 5.99 6.98 6.91 7.88 5.87 6.12 

Primary capital ratio ....... .. ... . . .. .... 7.99 9.81 8.47 7.49 7.59 7.97 7.85 8.13 8.89 7.08 8.12 

Net loans and leases to deposits .... . . . . . 78.28 58.14 70.97 85.83 83.83 84.58 77.43 73.47 71.63 58.92 83,3,, 

... Growth Rates (year-to-year) ) 

Assets . ..... .... . . . . .... . . . .. . .... ... 4.4% 6.7% 10.3% 12.2% 2.5% 4.8% 9.4% 6.0% -0.6% -5.9% o.. Equity capital . . .. ... ...... . ... . . .. .... 10.3 5.1 9.2 14.8 15.8 13.5 9.9 8.5 5.3 2.4 12.3 

Net interest income . .. . .. .. ...... . .... . 9.9 12.2 18.7 16.2 7.7 9.2 10.9 10.4 5.6 -1 .9 17.4 

Net income . .... .. . . . . .. . . .. .... . . . ... 48.1 20.1 18.3 17.5 0.5 -2.4 6.6 4.6 18.0 107.2 48.9 

Nonperforming assets . .. . . . . . .. . .. . . .. . -6.5 0.6 9.6 11 .1 -2.8 7.7 15.1 2.1 -14.4 -29.0 -15.9 

Net charge-offs ... . . . . . ... .. .. . . . . .. ... -13.8 -0.8 41.6 2.7 -14.6 -5.7 -31.5 -16.5 -25.5 -32.3 17.5 

Loan loss provision .. . .. . ... ....... . .. . -23.8 -1.0 25.2 28.4 1.1 7.0 18.9 0.0 6.0 -73.8 13.3 

PRIOR FIRST QUARTERS 

(The way it was ... ) 

Return on assets . . . . . .. . . .. . ... . . 1988 0.66% 0.75% 0.69% 0.74% 0.55% 0.94% 1.01% 1.12% 1.05% -2.43% 0.82% 

... . . . .. . . . . ..... 1986 0.75 0.88 0.91 0.70 0.65 0.85 1.14 0.98 0.77 -0.09 0.58 

. ..... .. . .. .. .. . . 1984 0.73 0.99 0.93 0.78 0.46 0.70 1.01 0.77 0.94 0.85 0.41 

Equity capital ratio . . . .. . . ... . . .. . 1988 6.07 8.71 7.30 6.19 4.42 5.53 6.95 6.75 7.43 5.40 5.75 

. .... . .. .. . .. . . . . 1986 6.34 8.67 7.25 6.14 5.01 5.80 6.79 7.04 7.52 6.94 5.69 

...... . ...... . ... 1984 6.10 8.65 7.17 5.80 4.49 5.43 6.79 6.66 7.59 6.94 5.31 

Nonperforming assets to assets .... 1988 2.48 2.16 1.92 1.81 3.43 2.39 1.06 1.26 1.87 6.29 3.26 

.... . .. . ........ . 1986 1.99 2.39 1.83 1.59 2.26 1.54 1.09 1.61 2.52 3.18 3.07 

. ... . . .. . ..... . . . 1984 2.07 1.73 1.57 1.78 2.73 1.65 1.10 2.20 1.83 2.25 3.47 

Net charge-offs to loans and leases . 1988 0.88 0.65 0.61 0.96 1.02 0.69 0.69 0.78 1.38 2.16 0.79 

. . . . . . . ... . .. . . .. 1986 0.74 0.91 0.65 0.75 0.73 0.52 0.46 0.56 1.53 1.20 0.98 

. . . .. .. . . .. . ... .. 1984 0.49 0.56 0.39 0.46 0.53 0.27 0.31 0.58 0.55 0.96 0.66 

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. Full-Year 1988 Bank Data (Dollar figures in billions, ratios in %) 

Asset Size Distribution Geographic Distribution 

Less $100 Million Greater EAST WEST 

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 

Number of banks reporting .. .. .. . ..... . . 13,121 10,200 2,467 324 40 1,081 1,943 2,926 3,109 2,557 1,505 

Total assets .. . .... . ...... . ... .. ..... . 3,131 379 592 998 1,162 1,244 440 506 210 262 469 

Total deposits ........ . ... .. . . ......... 2,432 337 508 753 833 903 352 408 166 222 379 

Net income ffn millions) . .. . ..... . ..... . .. . 25,060 2,402 4,206 7,381 11,072 11,930 4,093 5,209 1,820 -1,778 3,786 

Percentage of banks losing money .. . . . .. 14.2% 15.9% 8.5% 7.4% 5.0% 9.8% 13.9% 4.5% 8.0% 30.9% 21 .3% 

Perfonnance ratios (annualized) 

Yield on earning assets . .. . .... . .. . . .. .. 10.30% 9.84% 10.00% 10.15% 10.74% 10.82% 10.00% 9.70% 10.25% 9.31% 10.42% 

Cost of funding earning assets ... . .. . .... 6.24 5.39 5.54 5.85 7.22 7.10 5.68 5.77 5.85 5.76 5.40 

Net interest margin . . ... . .. .. . . . . . ..... 4.06 4.45 4.46 4.31 3.51 3.72 4.31 3.93 4.40 3.55 5.02 

Net noninterest expense to earning assets . 2.13 2.85 2.66 2.26 1.51 1.71 2.45 2.04 2.12 2.72 2.n 

Net operating cash flow to assets . .. .. . .. 1.68 1.45 1.62 1.80 1.69 1.76 1.65 1.68 2.04 0.71 1.92 

Net operating income to assets . ... ... . . . 0.81 0.64 0.75 0.79 0.92 0.97 1.00 1.06 0.81 -0.72 0.79 

Return on assets ... ...... . .... . .. . .. . 0.83 0.66 0.75 0.79 0.96 0.98 0.98 1.07 0.90 -0.71 0.85 

Return on equity ... . .. ... . ... . . . ... .. . 13.43 7.37 10.16 12.73 20.25 17.35 14.00 15.96 11.95 -11 .84 14.70 

Net charge-offs to loans and leases ...... 0.99 0.87 0.78 1.06 1.07 0.82 0.63 0.72 1.33 2.37 1.23 

Loan loss provision to net charge-offs . . . .. 91.86 117.10 121.12 102.48 67.39 90.74 107.35 82.23 92.04 103.93 81 .57 

Condition Ratios 

Loss allowance to: 

Loans and leases .. . ........... .. .. . . 2.41% 1.67% 1.58% 1.75% 3.63% 2.83% 1.29% 1.97% 1.92% 3.02% 2.71% 

Noncurrent loans and leases . .......... 82.75 71.75 78.10 92.08 81.80 78.60 104.97 117.81 95.82 55.47 86.17 

Nonperforming assets to assets ... . . . . . . 2.14 1.91 1.73 1.52 2.96 2.35 1.01 1.14 1.51 4.55 2.66 

Equity capital ratio . . . . ... . ...... . . ... . 6.28 8.74 7.24 6.16 5.10 5.93 6.94 6.76 7.45 5.68 5.91 

Primary capital ratio ............... . .... 7.85 9.65 8.20 7.37 7.51 7.79 7.80 8.03 8.55 7.16 7.96 

Net loans and leases to deposits ..... .. . . 77.55 57.87 70.01 84.66 83.69 83.46 77.20 72.67 71 .89 59.68 82.01 

Growth Rates (year-to-year) 

,els . . .. . ............. . ............ 4.4% 6.8% 11.2% 13.8% 2.1% 5.4% 8.2% 5.4% 0.8% -6.5% 5.5% 

.ity capital ... . . . ...... .. . . . . .. . .... 9.0 4.7 8.7 13.5 16.8 15.1 10.3 9.2 0.8 -8.9 8.4 

f\lel interest income .. . . . . . ... .. .... .... 7.4 6.8 12.2 15.4 9.4 12.6 6.9 7.2 4.7 -8.5 6.4 

Net income ..... . .... . .. . ... . .... .. . . . 807.5 21.3 10.2 58.3 N/M 855.2 14.7 161 .5 35.0 N/M 3730.9 

Nonperforming assets . .. . ... .. .... . . . .. -9.2 1.8 11 .0 9.5 -6.1 1.5 5.7 -5.8 -18.1 -26.4 -14.5 

Net charge-offs . .. . ....... ... .. .. . . .. . . 12.4 -13.4 11.4 39.9 25.8 31 .3 1.4 13.0 -12.5 0.8 15.1 

Loan loss provision . ...... . . . .. . ..... . . -54.8 -13.3 4.4 -12.8 -77.6 -67.6 -17.3 -60.5 -34.9 -25.8 -55.9 

PRIOR YEARS 

(The way it was ... ) 

Return on assets . ........ . . . ..... 1987 0.10% 0.52% 0.69% 0.48% -0.65% -0.14% 0.94% 0.43% 0.68% -0.90% -0.02% 

.... . .. .. . .. .. ... 1985 0.70 0.64 0.83 0.87 0.51 0.78 1.04 0.82 0.70 0.43 0.34 

... .. . . .... . ..... 1983 0.66 1.23 1.12 0.86 0.63 0.67 0.96 0.69 0.94 0.64 0.34 

Equity capital ratio . .... . .. . ...... 1987 6.02 8.57 7.23 6.09 4.42 5.43 6.81 6.52 7.44 5.83 5.75 

. . ............... 1985 6.19 8.53 7.20 5.85 4.91 5.67 6.60 6.81 7.34 6.86 5.53 

. ...... .. .... . ... 1983 6.00 8.50 7.00 5.70 4.43 5.36 6.76 6.51 7.48 6.72 5.22 

Nonperforming assets to assets .... 1987 2.46 2.10 1.81 1.81 3.47 2.44 1.04 1.27 1.86 5.79 3.28 

. . ...... .. ....... 1985 1.46 0.87 0.94 1.27 2.19 1.43 0.63 1.12 1.31 1.85 2.28 

... . .. . ... .. ..... 1983 1.97 1.58 1.53 1.70 2.59 1.55 1.11 2.07 1.61 2.04 3.38 

Net charge-offs to loans and leases . 1987 0.93 1.15 0.88 0.93 0.89 0.67 0.69 0.68 1.63 2.10 1.09 

. .... . . .... . .. ... 1985 0.84 1.38 0.83 0.69 0.78 0.48 0.59 0.68 1.71 1.44 1.19 

... . . . . . . . ... . . . . 1983 0.67 1.16 0.90 0.97 0.77 0.39 0.55 0.73 0.77 1.40 0.79 

5 
FDIC FIRST CLASS

MAIL 

Federal Deposit Insurance Corporation 

Washington, DC 20429 

OFFICIAL BUSINESS 

Penalty for Private Use, $300 

Postage & 

Fees Paid 

FDIC 

Permit No. G36 

NOTES TO USERS 

COMPUTATION METHODOLOGY FOR PERFORMANCE AND CONDITION RATIOS 

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

All asset and liability figures used in calculating performance ratios represent average amounts for the period (beginning-0f-period amount plus end-0f-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 uniform 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, e~cluding 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. 

Nonpertorrning Assets-the sum of loans past-due 90 days or more, loans in nonaccrual status, and noninvestment 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 FOIC's Offic. 

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