Third Quarter 1987 

FDIC 

Office of Res8ll'Ch 

& Strategic Planning 

John Quinn 

(202) 898-3940 

Ross Waldrop 

(202) 898-3951 

The FDIC 

uarte r Iy_______L_.W_i_llia_m_S_e_id_m_an_,C_h_ai_rm_a_n 

anking Rofile 

COMMERCIAL BANKING PERFORMANCE - THIRD QUARTER, 1987 

• BANKS EARN RECORD $5.8 BILLION IN THIRD QUARTER 

• SECOND QUARTER ADDITIONS TO RESERVES LEAD_ TO THIRD 

QUARTER IMPROVEMENT 

• SMALL BANKS CONTINUE TO IMPROVE IN MIDWEST, STRUGGLE 

IN SOUTHWEST 

• NUMBER OF BANK FAILURES IN 1987 PASSES LAST YEAR'S RECORD LEVEL 

In a sharp rebound from its second-quarter results, the 

commercial banking industry reported record high earnings for the quarter ending September 30. Bank income 

totalled $5.8 billion, surpassing the previous high of $5.3 

billion registered in the first quarter of this year. The 

earnings in the first and third quarters more than offset the record $10.6 billion second-quarter loss, so that 

income through the first nine months amounted to $480 

million. Third-quarter income was 22 percent higher than 

a year ago. Realized gains from investment securities 

were down markedly from year-ago levels, indicating that 

the improvement reflects more profitable operations. 

Net operating income - income before realized 

securities gains and nonrecurring gains - was $5.4 

billion, $1.8 billion higher than in the third quarter of 

1986, a gain of 51 percent. 

Chart A - Quarterly Net Income of 

FDIC-Insured Commercial Banks, 1984-1987 

$ Billions 

7..------------------, 5.8 

5 ~ 45 - 4.8 4.7._5.,._o _ _,5,..1 _ _ 4 5 _ -i5•. 3---1!,_ 

3 ~m2 3J . _ ,: • • ::t ::c-r- ::i-111-

, JI , _Ii L 4.1 iL 11 ~-li:;,. I]- -1 >---·-------------<irn_ 

- 31----------------llt __ 

-5 >----------------<It _ -•- ~_:i~-~rit--ie_s&- o-th-er-no_nr_ecu_m_·ng-------11!1! ______ -7 1-

_ 1--lillilll _:r_N_ _ _ _ _ - e, operating in_co_me _ _______Ill!_

9 

-11 ~------------~~~ 

1234 1234 1234 123 

1984 1985 1986 1987 

Improved third-quarter results were attributable in part 

to lower loan-loss expenses which, while much lower 

than in the previous quarter, were also $1.2 billion less 

than in the third quarter a year ago. Wider interest-rate 

spreads have been another source of earnings strength, 

following two years of deterioration. As interest-rate 

levels have risen through much of the year, yields on 

loans and investment securities appear to have increased somewhat faster than deposit and other liability 

costs. As a result, third-quarter net interest income was 

$1.4 billion higher than in the third quarter of 1986, and 

net interest margins widened. 

Chart B - Quarterly Net Interest Margins 

Net Interest Margin (%/ 1983-1987 5.50 

5.00 

-~ .... .... ii-...,...1'.... ........ 4.50 .... ,... Banks <$100 Million 

" .... 

" i-,r- 4.00 I I I I J I .,........, ,;;:,,.. I I I I I ./ Banks > $100 Million '""!' ?W'. 

3.50 

3.00 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 

1983 1984 1985 1986 1987 

As expected, the ten largest banks, which reported 

massive operating losses at mid-year stemming from 

unprecedented second-quarter provisions for possible 

loan losses, showed the most marked improvement over 

third-quarter 1986 results. Bottom-line income increased 50 percent and net operating income soared 77 percent, as six of the ten reported higher earnings. The 

exceptional loss provisioning of the previous quarter 

substantially reduced the need for these banks to add 

to reserves during the third quarter, resulting in provisions that were 52 percent lower than ayear earlier. Additionally, the losses booked in the second quarter 

encouraged some banks to realize gains on over-funded 

pension plans and asset sales, and resulted in other tax 

benefits that enhanced third-quarter profits. 

For assistance contact: Section508@fdic.gov
Chart C - Composition of Commercial Banks' 

Net Worth, December 1984-September 1987 

% of Total Assets 

10~------------------, 

8 

6 

4 

<> <> <> <> <> <> $100MM $100MM $100MM $100MM $100MM $100MM 

12/84 12/85 12/86 3/87 6/87 9/87 

[illJ Equity Capital mi A~ditional . • Secondary Capital Primary Capital 

Other large banks also reported earnings gains. The 72 

other banks with assets greater than $5 billion had a 

13 percent aggregate increase in net income over last 

year's third quarter, with those reporting increases outnumbering those with decreases by a 3-to-1 margin. 

Banks in the $1 billion to $5 billion asset-size range 

reported significantly higher quarterly net income as 

well, up more than 16 percent over the same quarter 

a year ago. Third-quarter earnings at regional banks, like 

those at money-center institutions, were aided by 

special loan loss provisions taken in the second quarter, 

and earnings through the first nine months remain a bit 

below last year's levels. Noninterest expenses were up 

16 percent from a year ago for banks larger than $5 

billion, partly due to acquisitions by some regional 

banks. 

Chart D - Composition of Nonperforming* 

Loans by Region, September 30, 1987 

% of Total Loans and Leases 

a~-----------------, 7.38 

ALL w SW MW C SE NE 

D Consumer EJ Real Estate §§§1 Commercial All Other Loans Loans Loans Loans and Leases 

•Nonperforming loans = loans 90 days or more past - due, 

nonaccrual and restructured loans 

Smaller banks are showing signs that their financial condition has improved from a year ago. Banks with less 

than $100 million in assets saw their net income in the 

third quarter climb 14.3 percent above their earnings in 

the year-earlier quarter. Their net operating income gain 

was an even more dramatic 43 percent. For the first 

three quarters of 1987, net operating income is almost 

18 percent above the level of a year ago. Net income 

fell slightly over the same period, however, because of 

smaller gains from securities sales. 

Banks in the Midwest region account for much of the 

improvement in small-bank profitability this year. Net income of banks in the Midwest climbed 38.8 percent 

from third-quarter 1986 to third-quarter 1987, while 

nonperforming assets dropped by 10 percent and net 

charge-offs were down 42 percent. At the same time, 

the number of farm banks on the "Problem List" has 

fallen to 564 as of September 30, having peaked at 609 

in January. The total number of "problem" commercial 

banks declined slightly in the third quarter, from 1,609 

to 1,591. However, the number of commercial banks to 

have failed or received assistance during the year rose 

to 151 through the third quarter, surpassing 1986's fullyear total of 144. Over half of 1987's record number of 

bank failures have been in the Southwest, where banks 

continue to struggle with asset-quality problems. 

Nonperforming assets continued to grow at a faster rate 

in the Southwest than loan-loss reserves, and net 

charge-offs were down only slightly through the first 

nine months of this year. So far this year, nearly one 

out of every three banks in the Southwest has been unprofitable. 

Chart E - Problem Commercial Banks 

1982-1987 Number of Banks 

41234123412341234123 

1982 1983 1984 1985 1986 1987 

Fourth-quarter results will be greatly influenced by loanloss provisioning. Provisions should remain lower and 

net operating income should be up at large banks, after 

their additions to reserves in the second quarter. Results 

will be mixed at smaller banks, which tend to book most 

of their annual loan-loss expenses in the fourth quarter. 

There are indications that the drop in the stock market 

has resulted in an increase in bank deposits. Combined with the drop in interest rates caused by recent stock 

market turmoil, this could reduce funding costs and further bolster interest spreads. If asset-quality problems 

and overhead expenses are contained in the fourth 

quarter, industry earnings should surpass the $3.5 billion 

level recorded in the fourth quarter of each of the last 

three years. Regardless of fourth-quarter results, 

however, full-year industry profitability will be at its 

lowest level since 1934. 

2 
Table I. Aggregate Condition and Income Data, FDIC-Insured Commercial Banks 

(dollar figures in millions) 

Preliminary 

3rd Qtr 2nd Qtr 3rd Qtr % Change 

1987 1987 1986 86:3-87:3 

Number of banks reporting .. .. ...... . . . ......... . . .. ....... ... .. . 13,800 13,947 14,307 -3.5 

Total employees (full-time equivalent) ................ .. ... . ••.• ... .. 1,554,797 1,622,358 1,568,220 -0.9 

CONDITION DATA 

Total Assets . . . .. . . ...... . . . .. . ................ . .. . .. . .. ... .•.. $2,941,711 $2,913,101 $2,801,844 5.0 

Real estate loans ...... .. ..... .. ............ . . .. .... . . .. . . . . 578,361 556,559 486,868 18.8 

Commercial & industrial loans . ... . ...... . ..... .. . .. ..... . . . . . 580,170 582,853 572,082 1.4 

Loans to individuals ....... . .. ... ..... .. .................... . 341 ,629 332,983 326,046 4.8 

Fann loans ..... .. . .. . .. .... . .. . ....... ... .... ... .. ...... . . 30,985 30,840 34,204 -9.4 

Other loans and leases ...... ... . . .... .. ... .. .... .. . ... . . ... . 265,953 265,193 283,938 0.8 

Total loans and leases . . . . . .• . ............. . ................. 1,797,098 1,768,408 1,683,137 6.8 

LESS: Reserve for losses . ... ..... . ...... . . . .. ..... . . . .. . . . . . 47,396 47,208 27,271 73.8 

Net loans and leases . .... .. ............. . ... .•• •• • ............ 1,749,702 1,721,200 1,655,866 5.7 

Temporary investments ... . .... . ... . ... ... ... . ....... . .. .. .... . 446,428 449,673 450,958 -1.0 

Securities over 1 year . . ..... ..... . . . ........ .. .......... ..... . 387,107 375,865 343,075 12.8 

All other assets . ....... . . . .......... . ............ .. ......... . 358,474 366,383 351,945 1.9 

Total liabilities and capital . . . .. .. . ....... .. ..... . ...... . ...... . .. . $2,941,711 $2,913,101 $2,801,844 5.0 

Noninterest-bearing deposits .. . ... . -~ . ......... . . . ....• .. ....... 450,510 471,706 446,562 0.9 

Interest-bearing deposits ... ..... ... ............. . .. .. .. ....... . 1,814,770 1,793,308 1,713,078 5.9 

Other borrowed funds ................. .. . .... .... . . . .. . ...... . 367,627 350,571 339,187 8.4 

Subordinated debt ... . ...... . ................ . .... . ....•.. . . .. 17,432 17,283 16,496 5.7 

All other liabilities .... ... .. . . . ..................... .. . .... . .. . 111,083 104,910 107,046 3.8 

Equity capital ............ .. ..... ...... ...... .... ... . .. ... ... . 180,289 175,323 179,475 0.5 

Primary Capital . ... . . . ........... . . . .... .... . .. ............. ... . 231,443 225,889 210,243 10.1 

Nonperforming assets . .... . .. . .. .......• • ....... . .... . .......... 76,057 75,746 58,765 29.4 

Loan commitments and letters of credit .....••••. .. ................ 773,665 766,473 745,756 3.7 

Domestic office assets .... . ...... . .. .. ... ...... ................ . 2,517,843 2,495,189 2,385,743 5.5 

Foreign office assets ... ..... . ... . . ... .... ... . .•. .. ... .... . ..... . 423,868 417,912 416,101 1.9 

Domestic office deposits ... ..... .......... ....... . .... .. . ....... . 1,920,882 1,929,024 1,834,804 4.7 

Foreign office deposits .. .... ............ . ...... ..... . . ......... . 344,398 335,990 324,836 6.0 

Earning Assets .... . .. ...... . ... . . ...... ...... ... ..... . ..... . .. . 2,583,249 2,546,738 2,449,900 5.4 

Preliminary Preliminary 

INCOME DATA 1st 3 Qtrs 1st 3 Qtrs 3rd Qtr 3rd Qtr 

1987 1986 % Change 1987 1986 % Change 

Total interest income . . . . . . . . . . . . . . . . $180,312 $179,939 -0.2 $61 ,649 58,351 5.7 

Total interest expense . . . . . . . . . . . . . . 106,355 109,231 -2.6 36,445 34,570 5.4 

Net interest income . . . . . . . . . . • • • • 73,957 70,708 4.6 25,204 23,781 6.0 

Provisions for loan losses . . . . . . . . . . . 29,222 15,133 93.1 3,870 5,105 -24.2 

Total noninterest income ... . . .. .. .. . 29,404 26,040 12.9 10,349 9,081 14.0 

Total noninterest expense ......... .. 71,197 66,049 7.8 24,228 22,465 7.8 

Applicable income taxes . . . . . . . . . . . . 4,038 4,804 -15.9 2,012 1,683 19.5 

Net operating income ..... .. ...... - 1,096 10,762 NIM 5,443 3,609 50.8 

Securities gains, net . . . . . . . . . . . . . . . . 1,393 2,982 -53.3 262 1,096 -76.1 

Extraordinary gains, net ............. 183 212 -13.7 128 67 91 .0 

Net Income . . . . . . . . . . . . . . . . . . . . . 480 13,956 -96.6 5,833 4,772 22.2 

Net charge-offs . . . . . . . . . . . . . . . . . . . . 10,644 11,097 -4.1 3,713 4,160 -10.7 

Net additions to capital stock .... . ... 1,105 993 11 .3 361 602 -40.0 

Cash dividends on capital stock . . . . . . 6,989 5,982 15.3 2,297 1,966 16.8 

Table II. Selected Indicators, FDIC-Insured Commercial Banks 

1981 1982 1983 1984 1985 1986 1981' 

Return on assets. . . . . . . . . . . . . . . 0.78% 0.71% 0.66% 0.65% 0.70% 0.64% 0.02% 

Return on equity . . . . . . . . . . . . . . . 13.08 12.11 10.70 10.73 11.31 10.18 0.35 

Equity capital to assets . . . . . . . . . 5.83 5.87 6.00 6.15 6.20 6.21 6.13 

Primary capital to assets . . . . . . . . 6.39 6.47 6.59 6.98 6.94 7.03 7.75 

Nonperforming assets to assets . . NIA 1.85 1.97 1.97 1.87 1.95 2.59 

Net charge-offs to loans . . . . . . . . . 0.37 0.56 0.67 0.76 0.84 0.99 0.80 

Asset grow1h rate . . . . . . . . . . . . . . 9.36 8.12 6.75 7.1 1 8.86 7.62 4.99 

Net operating income grow1h . . . . . 7.60 -0.62 -3.69 3.40 6.30 -16.20 NIM 

Number of unprofitable banks . . . . 741 1,196 1,530 1,891 2,453 2,784 2,287 

Number of problem banks . . . . . . . 196 326 603 800 1,098 1,457 1,591 

Number of failed/assisted banks . . 7 34 45 78 118 144 151 

*For 1987, return on assets, return on equity and net charge-off ratios are annualized. 

NIA - Not available 

NIM - Not meaningful. 

3 
Table Ill. Third Quarter 1987 Bank Data (Dollar figures in billions, ratios in %) 

Asset Size Distribution Geographic Distribution 

EAST WEST Less Greater Ten 

than $100 $100-300 $300-1 ,(XX) $1 -5 than $5 Largest Northeast Southeast Central Midwest Southwest West 

All Banks Million Million Million Billion Billion Banks Region Region Region Region Region Region 

Number of banks 

reporting .. . ....... 13,800 11,053 1,877 528 260 72 10 1,080 1,920 3,066 3,254 2,945 1,534 

Total assets .... .... . $2,941.8 $393.1 $301.3 $267.3 $562.6 $720.8 $696.6 $1 ,163.2 $389.3 $465.8 $201.7 $279.0 $442.8 

Total deposits ....... . 2,265.3 349.4 263.8 221 .3 428.1 497.6 505.1 841.2 307.9 372.0 156.1 227.4 360.7 

% total banks .... . ... 100.0% 80.1% 13.6% 3.8% 1.9% 0.5% 0.1% 7.8% 13.9% 22.2% 23.6% 21.3% 11.1% 

Asset share (%) .... .. 100.0 13.4 10.2 9.1 19.1 24.5 23.7 39.5 13.2 15.8 6.9 9.5 15.1 

Deposit share (%) . . .. 100.0 15.4 11 .6 9.8 18.9 22.0 22.3 37.1 13.6 16.4 6.9 10.1 15.9 

Number of 

unprofitable banks ... 2,167 1,917 180 52 14 3 1 75 183 211 424 928 345 

Number of failed/ 

assisted banks ...... 52 46 5 1 0 0 0 1 2 0 6 33 10 

Performance ratios 

(annualized) 

Yield on earning assets 9.61% 9.70% 9.69% 9.78% 9.62% 9.54% 9.90% 9.83% 9.86% 9.33% 9.79% 9.30% 9.97% 

Cost of funding 

earning assets . . . .. . 5.68 5.23 5.23 5.32 5.33 5.74 6.76 6.26 5.35 5.44 5.53 5.75 5.17 

Net interest margin .. . 3.93 4.47 4.46 4.46 4.29 3.80 3.14 3.57 4.51 3.88 4.29 3.55 4.80 

Net noninterest 

expense to earning 

assets ...... . . . .... 2.16 2.85 2.67 2.61 2.31 1.60 1.62 1.73 2.55 2.21 1.97 2.58 2.98 

Net operating 

income to assets .... 0.74 0.57 0.75 0.66 0.78 0.84 0.71 0.85 1.02 0.89 1.02 -0.57 0.72 

Return on assets . .. . . 0.80 0.63 0.78 0.69 0.81 0.91 0.79 0.94 1.06 0.92 0.99 -0.48 0.76 

Return on equity . . ... 13.12 7.17 10.19 9.64 12.56 17.09 20.12 17.55 15.10 13.65 13.14 -7.45 13.71 

Net charge-offs to 

loans and leases .... 0.83 1.11 0.78 0.96 0.82 0.87 0.70 0.58 0.57 0.66 1.38 2.19 0.96 

Condition Ratios 

Loss allowance to 

loans and leases .... 2.64% 1.63% 1.55% 1.68% 1,7?% 2.73% 4.54% 3.06% 1.41% 2.12% 2.30% 2.91% 2.97% 

Nonperforming assets 

to assets ........... 2.59 2.31 1.95 2.03 1.92 2.28 3.98 2.51 1.18 1.39 2.03 5.47 3.54 

Equity capital ratio .... 6.13 8.80 7.74 7.18 6.52 5.36 3.97 5.41 7.03 6.79 7.61 6.45 5.62 

Primary capital ratio ... 7.75 9.57 9.10 8.80 8.29 7.93 7.17 7.44 7.78 8.00 8.81 7.88 7.72 

Net loans and leases 

to assets . . .. . . . .. . . 59.48 51 .83 56.91 61.22 64.01 61 .79 58.17 59.49 60.83 58.18 53.73 54.90 65.09 

Net assets repriceable 

in one year or less 

to assets . .. . ... .. .. -7.29 -10.37 -8.58 -7.90 -7.88 -7.58 -3.97 -5.26 -11 .90 -5.75 -15.24 -10.63 -4.44 

Growth Rates 

(year-to-year) 

Assets . ........... . . 5.0% 4.5% 7.2% 10.5% 12.1% 10.5% 2.6% 9.2% 8.8% 5.6% 4.3% -5.4% -1 .4% 

Earning assets . . . .. . . 5.4 4.9 7.9 11 .2 13.1 11.3 2.2 9.7 9.5 5.8 4.6 -5.8 -0.5 

Loans and leases . .. .. 6.8 6.2 10.5 14.4 16.8 12.9 0.3 11 .0 14.1 9.7 4.6 -8.1 -0.6 

Loss reserve .. ... ... . 73.8 13.8 22.4 30.0 39.5 88.9 154.9 131 .1 23.7 57.0 26.1 23.8 62.4 

Net charge-offs ... . ... -10.7 -14.8 -11 .7 18.0 16.8 5.9 -26.5 7.6 11.9 18.4 -42.1 -8.2 -27.5 

Nonperforming assets . 29.4 2.3 8.9 20.5 31 .6 49.5 56.4 69.6 22.7 -3.0 -10.4 27.4 11.7 

Deposits .. .... ... .. . 4.9 4.8 7.0 9.2 10.2 11 .5 4.2 9.7 9.0 5.1 1.8 -5.3 --0.6 

Equity capital .... . . . . 0.5 3.4 7.8 7.9 13.8 4.1 -17.6 -0.7 11 .6 1.1 3.6 -10.8 -1.2 

Interest income .. .... 5.7 0.3 5.6 9.5 14.1 13.4 6.4 14.0 7.5 3.8 -0.3 -5.5 -2.3 

Interest expense . . . . .. 5.4 -4.6 1.0 6.3 11.6 15.3 11 .0 17.5 4.9 1.3 -2.5 -7.0 -6.9 

Net interest income . . . 6.0 6.7 11.5 13.5 17.4 10.6 -2.2 8.3 10.8 7.5 2.6 -2.8 3.2 

Loan loss expense .... -24.2 -21.1 -9.2 -4.9 15.9 -17.6 -52.3 -12.8 4.1 -22.1 -52.5 -12.9 -42.3 

Noninterest income .. . 14.0 9.8 9.7 19.9 17.1 24.9 12.6 30.5 7.8 -1.1 23.9 7.4 -7.5 

Noninterest expense .. 7.8 7.6 10.5 11.7 12.7 16.0 8.8 13.2 7.8 7.5 4.0 5.3 1.8 

Net operating income . 50.8 43.2 23.0 41 .1 27.2 49.6 77.6 41.2 14.4 15.7 555.4 N/M 94.2 

Net income . . . . .. .... 22.2 14.3 1.3 9.7 16.2 13.0 50.7 28.3 6.6 2.9 38.8 N/M 63.3 

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 1987 Bank Data (Dollar figures in billions, ratios in %) 

Asset Size Distribution Geographic Distribution 

EAST WEST Less Greater Ten 

than $100 $100-300 $300-1 ,000 $1 -5 than $5 Largest Northeast Southeast Central Midwest Southwest West 

All Banks Million Million Million Billion Billion Banks Region Region Region Region Region Region 

Number of unprofitable 

banks . . .. . . . .. .... 2,287 2,006 170 56 27 18 10 95 199 186 438 978 390 

Number of failed/ 

assisted banks .. . . . 151 140 10 1 0 0 0 2 6 6 26 86 25 

Perfonnance ratios 

(annualizec!) 

Yield on earning assets 9.42% 9.57% 9.46% 9.53% 9.35% 9.35% 9.79% 9.98% 9.56% 9.13% 9.64% 8.96% 9.73% 

Cost of funding 

earning assets . .. .. 5.56 5.17 5.10 5.13 5.15 5.60 6.68 6.36 5.14 5.31 5.44 5.52 5.04 

Net interest margin . . 3.86 4.40 4.36 4.40 4.20 3.75 3.10 3.62 4.42 3.82 4.20 3.44 4.69 

Net noninterest 

expense to earning 

assets .. .. . . .. . ... 2.18 2.78 2.63 2.62 2.34 1.95 1.64 1.88 2.51 2.15 1.94 2.42 2.95 

Net operating 

income to assets ... -0.05 0.60 0.75 0.56 0.60 -0.02 -1 .52 -0.49 0.94 0.39 0.62 -0.54 -0.21 

Return on assets .. .. 0.02 0.68 0.82 0.62 0.66 0.05 -1 .43 -0.39 1.00 0.44 0.66 -0.47 -0.16 

Return on equity .. . . 0.35 7.79 10.75 8.65 10.18 0.94 -31 .46 -6.88 14.51 6.44 8.89 -7.10 -2.82 

Net charge-offs to 

loans and leases ... 0.80 1.03 0.73 0.91 0.75 0.80 0.77 0.58 0.53 0.55 1.41 1.92 1.00 

Growth Rates 

(year to year) 

Net charge-offs ..... -4.1% -12.5% -2.8% 34.1% 14.2% 8.9% -13.2% 9.6% 12.8% -1.8% -27.2% -1 .2% -34.9% 

Interest income ..... 0.2 -3.2 0.7 3.5 7.1 7.1 0.5 7.0 2.9 -1.3 -3.8 -13.6 -5.1 

Interest expense .. .. -2.6 -8.5 -4.8 -2.3 1.2 4.8 1.8 6.9 -2.5 -5.7 -7.6 -15.5 -12.1 

Net interest income . . 4.6 3.9 8.1 11 .2 15.3 10.5 -2.3 7.4 10.1 5.5 1.5 -10.3 3.9 

Loan loss expense ... 93.1 -15.9 -3.1 20.7 32.8 129.6 248.3 282.7 28.9 105.5 -15.8 -10.1 54.9 

Noninterest income .. 12.9 9.6 10.1 14.4 13.4 20.6 15.3 20.8 9.9 6.5 21.0 5.5 2.4 

Noninterest expense . 7.8 5.9 2.4 11 .0 11 .7 16.4 9.6 12.3 7.9 6.4 5.4 -0.6 5.6 

Net operating income N/M 17.7 8.9 -5.9 2.8 N/M N/M N/M -5.7 -49.1 75.4 N/M N/M 

Net income . . . . . . . . -96.6 -1 .3 -2.2 -15.5 -2.2 -93.0 NIM N/M -0.3 -50.1 -9.2 N/M N/M 

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-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 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, 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. 

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. 

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

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. 

Net Assets Repriceable in One Year or Less-all assets with interest rates that are repriceable in one year or less plus assets with remaining maturity of one year or less, 

minus all liabilities that are repriced or due to mature within one year of the reporting date. A positive value indicates that banks' income from assets is more sensitive to 

movements in interest rates than is the expense of their liabilities, and vice-versa for a negative value. 

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. 

Loan Loss Expense-the quarterly addition to the loan loss reserve that will keep the balance of the reserve adequate to absorb the quarter's anticipated loan losses. 

Additional information regarding bank performance, bank failures and economic issues affecting the banking industry is available in the Banking and Economic Review, 

published by the Office of Research and Strategic Planning, FDIC. Information on legislative issues and changes in state and federal laws and regulations governing banks 

is contained in the Regulatory Review, also published by the Office of Research and Strategic Planning. Single-copy subscriptions are available to the public free of charge. 

Requests should be mailed to: 

Banking and Economic Review or Regulatory Review, Office of Research and Strategic Planning, Federal Deposit Insurance Corporation, 550 17th Street, N.W., Washington, 

D.C. 20429 

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