Fourth Quarter 1987 

FDIC 

Office of Research 

& Strategic Planning 

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 Rofile 

COMMERCIAL BANKING PERFORMANCE - FOURTH QUARTER, 1987 

• U.S. BANKS POST LOWEST RETURNS SINCE THE GREAT DEPRESSION 

• 1987'5 EXTRAORDINARY LOAN LOSS PROVISIONS ACCOUNT FOR 

DROP IN PROFITS 

• MIDWESTERN BANKS SHOW SIGNIFICANT IMPROVEMENT 

• SOUTHWESTERN BANKS SUFFER LARGE LOSSES 

• FOURTH QUARTER OPERA TING INCOME UP SHARPLY FROM 

YEAR-EARLIER LEVELS 

• NUMBER OF BANKS ON PROBLEM LIST DECLINES - FIRST TIME SINCE 1981 

• SIGNIFICANT IMPROVEMENT IN INDUSTRY PERFORMANCE EXPECTED IN 1988 

Commercial banks earned $3.7 billion in 1987, down Chart B - Quarterly Net Income of FDIC-Insured 

nearly 80 percent from the $17.5 billion earned in Commercial Banks, 1984-1987 $Billions 

1986, in their worst year for profitability since the 

Great Depression. Their return on assets of 0.13 percent and return on equity of 2.56 percent were the 

lowest levels since 1934. These results had been anticipated since the second quarter, when the nation's largest banks began setting aside sizable 

reserves for troubled loans to developing countries 

(LDCs). The soaring loan-loss provisions, over 67 _ • Socuntles & other nonrecurring gains 

percent higher than in 1986, fully accounted for the IillillJ Net operating incri me 4 

banking industry's year-to-year drop in earnings. 

Loan-loss provisions attributable to the international -81-------------------IHil operations of U.S. banks were $20.6 billion, $18 

billion higher than a year ago. Absent the extraor­ -101---------------1;::::1-----j 

dinary reserving for LDC loans, aggregate loan loss 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

provisions would have declined $3 billion from a 1984 1985 1986 1987 

year ago, and net income would have been roughly The loan-loss provisions had the positive effect of equal to 1986's level. raising the aggregate allowance for loan and lease 

losses 71 percent. At year-end, the ratio of the loss Chart A - Returns on Assets and Equity allowance to loans stood at 2.70 percent, compared at Insured Commercial Banks 

1935-1987 to 1.65 percent at the end of 1986. The ratio of equity ROA% ROE% 

15 capital to assets fell by 16 basis points to 6.05 percent, while the ratio of primary capital (which includes the loss allowance) to assets increased by 12 

47 basis points to 7.69 percent. Nonperforming 

assets were up 29 percent from a year ago, largely 

due to the impaired status of LDC loans, ending the 

year at 2.56 percent of .total assets. Most of the 

.4 growth in nonperforming assets took place in the 

first quarter of the year; nonperforming assets 

shrank by $1.5 billion in the fourth quarter. The 

possibility that some nonaccruing LDC loans may 

return to accrual status in 1988 increases the poten1935 1939 1944 1949 1954 1959 1964 1969 1974 1979 1984 1987 tial for further reductions. 

For assistance contact: Section508@fdic.gov
Fourth quarter operating income was $3.2 billion, up 

over 25 percent from the fourth quarter of 1986, 

despite loan loss provisions of $7.7 billion that were 

nearly 12 percent higher than the year-ago period. Interest margins, which narrowed for the full year, improved slightly during the second half of the year. 

They were especially strengthened in the fourth 

quarter in the wake of the October stock market 

decline, as banks enjoyed a large inflow of deposits 

and interest rates fell. Banking sector deposits, up 

only 2.2 percent for the year, grew at an annualized 

rate of 11.7 percent in the fourth quarter. The events 

of Black Monday also triggered a surge in loan demand as financial services firms sought to maintain 

liquidity. The largest banks were the greatest 

beneficiaries of the flight to quality; they also experienced a marked increase in noninterest income 

in the fourth quarter, especially from foreign exchange operations. 

Chart C - Quarterly Net Interest Margins 

1983-1987 Net Interest Margin (%) 

~~~~~~~~~~ ~~~~~~~ 

123412341234 1 2341234 

1983 1984 1985 1986 1987 

Asset growth was less than two percent during 1987, 

the smallest annual increase since 1948, and commercial loans were down two percent from yearearlier levels. The four percent growth in total loans 

was driven by increased real estate and consumer 

lending. Real estate loans outstanding at year-end 

actually exceeded banks' commercial loans by $10 

billion, reflecting the restructuring of banks' traditional operations in the face of increased competition. Much of the increase in real e~tate lending was 

in the form of home equity loans, which stood at 

nearly $33 billion at year-end. 

The outlook for 1988 is cautiously optimistic. Barring any new shocks, loan loss provisioning should 

be lower than usual this year, and profitability at 

money-center and regional banks will be much improved. The effectiveness of banks' efforts to expand noninterest income sources and curb 

operating expense growth will be an important 

determinant of profitability. Community banks 

showed improved results in 1987, with return on 

assets up 43 basis points at banks smaller than $100 

million, and 22 basis points for banks in the 

$100-to-300 million range. Unaffected by overseas 

loan problems, both of these size groups, representing 93.5 percent of all banks, saw charge-offs and 

loss provisions decrease by 10 to 25 percent from 

year-earlier levels. Smaller banks outside the 

Southwest should continue to show strong or improving earnings in 1988. 

The Southwest will continue to be a major source 

of earnings weakness. The levels of problem banks 

and failures remain high and the region's banking 

sector continues to operate at a loss. For the full 

year, 36 percent of the banks in the region were unprofitable and return on equity was a negative 11 .81 

percent. Persistent growth of nonperforming assets, 

despite high levels of loan charge-offs, points to 

more of the same this year. In contrast, the worst 

of the problems experienced by banks in the 

Midwest are behind them, and they can be expected 

to return soon to more traditional levels of profitability. The number of Midwest bank failures was down 

slightly, from 48 to 40, but the number of unprofitable 

banks was almost cut in half. Loan charge-offs 

declined 22 percent compared to 1986, while at the 

same time, asset quality improved, as nonperforming assets fell 6.5 percent. Midwestern banks showed the greatest improvement over 1986 results, with 

a 78 percent increase in net operating income on a 

year-to-year basis. 

The results for the Northeast and, to a lesser extent, the Central and West regions, were dominated 

by the loan-loss provisioning at the big money- -

center banks. Actions by the largest banks overshadowed generally strong performance by banks 

in the Central region. Loan loss provisions were 

almost twice 1986 levels, halving net income, but 

actual loan losses grew by only five percent. The 

Central region had the lowest proportions of both 

failed and unprofitable banks, and the second 

highest rate of loan growth. The Southeast enjoyed 

the strongest loan demand of the six regions, as 

loans grew 11 .3 percent and assets by 6.5 percent. 

That demand, combined with strong net interest 

margins, yielded a regional-high return on assets of 

0.93 percent. 

Chart D - Number of Insured Commercial Banks 

on the FDIC "Problem List" No of Banks 

1400 ··· •······•······•······•······•······S·······•·······• 

1000 ·· ·•······•······•·······•······•·······S·······• 

1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 

The number of banks with full-year earnings losses 

fell 15 percent to 2,366 in 1987, while the number 

of "Problem" banks leveled off, after peaking at midyear. On the whole, the number of banks on the 

"Problem List" increased by 102, 7.0 percent higher 

at the end of 1987 than 1986. This increase was the 

lowest, both in number of net additions and in 

percentage terms, since 1981. The outlook for 1988 

is for fewer troubled institutions, but the number 

of failures is not expected to be significantly lower 

than 1987's record. Industry profits for 1988 should 

be close to the $17.5 billion earned in 1986, as banks 

return to a more normal pattern of operations. 

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

(dollar figures in millions) 

Number of banks reporting .. . . . .. ... ...... ..... ..... ............ . 

Total employees (full-time equivalent) .............. .. . .... .. ....... . 

CONDITION DATA 

Total Assets ........... .. ...... . ..... .. .. .. ................... . 

Real estate loans . . ............ ... . . ..................... .. . 

Commercial & industrial loans . . .... . ...... .. ..... ... . .. ... .. . 

Loans to individuals ............. ... .... .. ......... . .. . ..... . 

Farm loans ... ...... . .. . ... .. ............... . . ... .. . ... ... . 

Other loans and leases .... . .. . ....... . . ..... .. ......... .... . 

Total loans and leases . ............... . .... . ......... ...... . . 

LESS: Reserve for losses . . .. .............. . .. .. ... ..... .... . 

Net loans and leases . . . ... .. . . ... . . . ... .. .. . . . ....... . ... .... . 

Temporary investments .. ......... .. .. . . . ................. .. .. . 

Securities over 1 year ...................... . ...... . •...... . ... 

All other assets .... . . . . ... .. .. ... . ... ..... . .. .. ... . .. .. . . . .. . 

Total liabilities and capital . . . . . .. .......... ... .. .. . .. . .. .... . ... . . 

Noninterest-bearing deposits ... .. .... . . . . .. . .. . . .... .... . ... . .. . 

Interest-bearing deposits .. .................... .... . ........... . 

Other borrowed funds ...... . ....... . .... ... ........ ... ....... . 

Subordinated debt . .. . ... ....... ... .... ..... .. .. . . .. ...... . .. . 

All other liabilities ...... .. .......... ..... .. .... ....... . ...... . 

Equity capital . ...... .. .... ......... ... ..... ....... . .. . . . ... . . 

Primary Capital .. . ... . ....... ... ............... ...... ... .. .... . . 

Nonperforming assets ............ . .... ...... .. .. ..... .... . ... .. . 

Loan commitments and letters of credit ........ .. .. . . ... .... . ..... . 

Domestic office assets ... ..... ....... .... .... ... ..... .. . .... ... . 

Foreign office assets . . . .... ... . . ..... . ............... . .... ..... . 

Domestic office deposits . ..... .. ............................ . . .. . 

Foreign office deposits .... . . . . ................. . ...... . .. .. . . .. . 

Earning Assets . .... .... . . ...... . . .. .. ........ .. ...... . . 

INCOME DATA 

Total interest income . ... ..... ..... . . 

Total interest expense .. .. . .. .. . . .. . 

Net interest income ... .... ...... . 

Provisions for loan losses ... ... .. . . . 

Total noninterest income . . ........ . . 

Total noninterest expense . ... ... . . . . 

Applicable income taxes . .. .... ... . . 

Net operating income ............ . 

Securities gains, net ... .. ... .. . . ... . 

Extraordinary gains, net ............ . 

Net Income .... . ....... ... ..... . 

Net charge-offs .. . ...... .. .... . ... . 

Net additions to capital stock ....... . 

Cash dividends on capital stock .. . .. . 

Preliminary 

Full Year Full Year 

1987 1986 

$244,695 $237,806 

144,810 142,824 

99,885 94,982 

36,965 22,075 

41,490 35,890 

96,933 90,247 

5,425 5,288 

2,052 13,262 

1,436 3,950 

219 274 

3,707 17,486 

15,901 16,550 

2,506 3,244 

10,620 9,228 

Preliminary 

4th Qtr 

1987 

13,654 

1,554,885 

$2,998,428 

599,135 

588,971 

350,361 

29,317 

259,009 

1,827,693 

49,429 

1,778,264 

450,623 

396,452 

373,089 

$2,998,428 

479,073 

1,853,600 

361,351 

17,586 

105,554 

181 ,264 

234,471 

74,300 

792,136 

2,572,769 

425,649 

1,991,066 

341,607 

2,625,339 

% Change 

2.9 

1.4 

5.2 

67.5 

15.6 

7.4 

2.6 

-84.5 

-63.6 

-20.1 

-78.8 

-3.9 

-22.7 

15.1 

Return on assets . . . . . . . . . . . . . . . 

Return on equity . . . . . . . . . . . . . . . 

Equity capital to assets . . . . . . . . . 

Primary capital ratio . . . . . . . . . . . . 

Nonperforming assets to assets . . 

Net charge-offs to loans . . . . . . . . . 

Asset growth rate . . . . . . . . . . . . . . 

Net operating income growth . . . . . 

Number of unprofitable banks . . . . 

Number of problem banks . . . . . . . 

Number of failed/assisted banks . . 

NIA - Not available 

3 

Table II. Selected Indicators, FDIC-Insured Commercial Banks 

1981 1982 1983 1984 

0.78% 0.71% 0.66% 0.65% 

13.08 12.11 10.70 10.73 

5.83 5.87 6.00 6.15 

6.39 6.47 6.59 6.91 

N/A 1.85 1.97 1.97 

0.37 0.56 0.67 0.76 

9.36 8.12 6.75 7.11 

7.60 -0.62 -3.69 3.40 

741 1,196 1,530 1,891 

196 326 603 800 

7 34 45 78 

3rd Qtr 

1987 

13,851 

1,554,142 

$2,942,652 

579,046 

580,375 

341,829 

31,066 

265,778 

1,798,094 

47,407 

1,750,687 

446,300 

387,372 

358,203 

$2,942,652 

450,361 

1,816,254 

367,418 

17,528 

110,675 

180,416 

231,492 

75,914 

773,589 

2,519,010 

423,642 

1,922,217 

344,398 

2,564,449 

Preliminary 

4th Qtr 

1987 

$64,270 

38,392 

25,878 

7,725 

12,070 

25,691 

1,381 

3,151 

42 

38 

3,231 

5,253 

1,392 

3,650 

1985 

0.70% 

11.31 

6.20 

6.91 

1.87 

0.84 

8.86 

6.30 

2,453 

1,098 

118 

4th Qtr 

1986 

14,200 

1,563,057 

$2,941,082 

515,365 

600,878 

335,698 

31,607 

273,102 

1,756,650 

28,003 

1,727,747 

463,627 

357,523 

392,185 

$2,941 ,082 

532,347 

1,751,121 

358,964 

16,993 

99,411 

182,246 

214,304 

57,667 

751,859 

2,532,352 

408,730 

1,969,673 

313,795 

2,548,897 

4th Qtr 

1986 

57,865 

33,593 

24,272 

6,924 

9,852 

24,196 

494 

2,510 

961 

61 

3,532 

5,448 

2,251 

3,245 

1986 

0.64% 

10.18 

6.21 

7.22 

1.95 

0.99 

7.62 

-16.20 

2,784 

1,457 

144 

% Change 

86:4-87:4 

-3.8 

-0.5 

1.9 

16.3 

-2.0 

4.4 

-7.2 

-4.8 

4.0 

71 .0 

2.9 

-2.8 

10.9 

-4.9 

1.9 

-10.0 

5.9 

0.7 

3.5 

6.2 

-0.5 

9.4 

29.0 

5.4 

1.6 

4.1 

1.1 

8.9 

3.0 

% Change 

11.1 

14.3 . 

6.6 

11.6 

22.5 

6.2 

179.6 

25.5 

-95.6 

-37.7 

-8.5 

-3.6 

-38.2 

12.5 

1987 

0.13% 

2.56 

6.05 

7.69 

2.46 

0.89 

1.95 

-84.53 

2,366 

1,559 

201 
Table Ill. Preliminary Fourth 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,WJ $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 .......... 13,654 10,891 1,876 535 268 74 10 1,079 1,916 3,042 3,230 2,860 1,527 

Total assets .... . .. .. $2,998.4 $392.6 $302.8 $272.2 $589.6 $761.3 $679.9 $1,179.7 $406.5 $479.7 $208.4 $279.9 $444.2 

Total deposits .. . . .... 2,332.7 350.5 266.1 226.4 455.1 536.4 498.2 865.0 323.2 387.1 163.7 229.3 364.1 

% total banks ... .... . 100.0% 79.8% 13.7% 3.9% 2.0% 0.5% 0.1% 7.9% 14.0% 22.3% 23.7% 20.9% 11 .2% 

Asset share (%) ..... . 100.0 13.1 10.1 9.1 19.6 25.4 22.7 39.3 13.6 16.0 7.0 9.3 14.8 

Deposit share (%) . .. . 100.0 15.0 11.4 9.7 19.5 23.0 21.4 37.1 13.9 16.6 7.0 9.8 15.6 

Number of 

unprofitable banks .. . 3,478 3,055 287 78 35 21 2 160 418 395 746 1,288 471 

Number of failed/ 

assisted banks . . ... . 50 46 2 2 0 0 0 1 0 1 14 26 8 

Perfonnance ratios 

(annualized) 

Yield on earning assets 9.86% 9.83% 9.84% 10.11% 10.46% 10.18% 10.48% 10.17% 9.79% 9.44% 9.83% 8.93% 10.20% 

Cost of funding 

earning assets ...... 5.89 5.34 5.35 5.58 5.92 6.23 7.14 6.53 5.45 5.56 5.56 5.61 5.31 

Net interest margin ... 3.97 4.49 4.49 4.53 4.54 3.95 3.34 3.64 4.34 3.88 4.27 3.32 4.89 

Net noninterest 

expense to earning 

assets .... .. ....... 2.09 3.12 2.76 2.72 2.47 2.01 1.08 1.52 2.45 2.06 2.02 2.73 2.90 

Net operating 

income to assets . . . . 0.42 0.24 0.62 0.51 0.40 -0.20 1.04 0.57 0.78 0.48 0.77 -1.08 0.42 

Return on assets ..... 0.43 0.23 0.63 0.53 0.41 -0,19 1.07 0.61 0.80 0.48 0.74 -1.12 0.42 

Return on equity ..... 7.14 2.65 8.15 7.56 6.32 -3.68 25.98 11.27 11.58 7.33 9.89 -18.02 7.42 

Net charge-offs to 

loans and leases .... 1.15 1.55 1.16 1.21 1.32 1.75 0.39 0.71 1.14 1.10 1.99 2.43 1.31 

Condition Ratios 

Loss allowance to 

loans and leases .... 2.70% 1.63% 1.50% 1.60% 1.85% 2.93% 4.65% 3.15% 1.38% 2.24% 2.21% 3.09% 3.13% 

Nonperfonning assets 

to assets .. ...... ... 2.48 2.09 1.75 1.87 1.93 2.28 3.88 2.44 1.04 1.27 1.87 5.80 3.28 

Equity capital ratio . .. . 6.05 8.61 7.62 6.88 6.41 5.11 4.24 5.43 6.81 6.53 7.46 6.07 5.77 

Primary capital ratio ... 7.69 9.36 8.35 7.69 7.36 7.01 7.55 7.51 7.53 7.80 8.58 7.55 7.97 

Net loans and leases 

to assets ........ ... 59.31 51.10 56.61 60.91 63.08 61.21 59.19 59.61 60.14 57.56 53.15 53.90 65.95 

Net assets repriceable 

in one year or less 

to assets ... . ....... -7.26 -9,46 -7.73 -7.43 -8.21 -8,01 -4.06 -6.05 -12.11 -4.60 -13.67 -11 .39 -3.28 

Growth Rates 

(year-to-year) 

Assets . ........ . .. .. 1.9% 4.0% 5.9% 7.7% 9.4% 8.4% -1 .8% 4.1% 6.5% 3.5% 1.0% -7.3% -2.2% 

Earning assets .. . .... 3.0 4.6 7.0 9.0 10.7 10.0 -1.3 5.1 7.6 4.1 1.4 -7.4 0.3 

Loans and leases ... . . 4.0 6.9 10.4 12.0 14.9 9.3 -3.0 5.9 11 .3 6.9 3.3 -8.4 -0,6 

Loss reserve . , ..... .. 71.0 10.7 16.6 21.0 43.5 98.8 140.7 123.8 18.0 65.6 16.9 19.7 63.5 

Net charge-offs ....... -3.6 -33.4 -21 .0 -1.4 42.9 113.4 -62.3 2.8 44.5 23.7 -13.4 -32.2 -6.2 

Nonperforming assets . 29.0 0.4 9.5 19.7 41 .7 58.3 49.6 64.5 15.7 0.9 -6.5 31.5 7.7 

Deposits ..... .. .. . . . 2.2 4.1 5.4 6.1 9.1 9.0 0.2 4.7 5.9 4.3 1.5 -7.0 -2.4 

Equity capital .. .. . ... -0,5 4.2 8.8 8.6 11.7 0.8 -16.3 -2.7 10.3 -0,5 5.7 -12.1 -0.6 

Interest income ...... 11 .1 4.3 9.0 11.5 25.4 24.9 14.6 19.9 11.6 9.0 4.5 -4.9 4.8 

Interest expense . .. ... 14.3 2.4 8.1 13.1 28.2 31.5 21.3 27.1 13.6 10.1 3.7 -4.4 4.0 

Net interest income .. . 6.6 6.6 10.1 9.5 22.0 15.6 2.4 8.8 9.2 7.6 5.5 - 5.6 5.7 

Loan loss expense . ... 11.6 -37.1 -32.2 -2.5 39.2 157.0 -28.0 42.6 14.1 75.5 -28.9 -32.2 12.4 

Noninterest income . . . 22.5 4.8 6.6 8.8 36.8 23.8 45.2 44.3 15.5 20.8 -5.7 1.3 0,8 

Noninterest expense . . 6.2 4.7 6.4 9.5 22.5 18,5 8.0 13.3 4.5 4.4 0.3 -0.1 0.6 

Net operating income . 25.5 N/M 163.9 26.2 -10.8 N/M 126.3 -3.0 33.9 -17.1 83.3 N/M 44.8 

Net income .......... -8,5 N/M 75.2 -0.4 -29.3 N/M 89.5 -13.4 3.7 -28.5 26.7 N/M 7.4 

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. Preliminary Full-Year 1987 Bank Data (Dollar figures in billions, ratios in %) 

Asset Size Distribution Geographic Distribution 

Less Greater Ten EAST WEST 

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 unprofitable 

banks . .. . .... . .. . . 2,366 2,070 174 62 33 18 9 104 230 184 412 1.038 398 

Number of failed/ 

assisted banks . . .. . 201 186 12 3 0 0 0 3 6 7 40 116 33 

Perfonnance ratios 

Yield on earning assets 9.53% 9.65% 9.59% 9.66% 9.62% 9.55% 9.99% 9.75% 9.54% 9.19% 9.65% 8.70% 9.83 % 

Cost of funding 

earning assets .... . 5.64 5.22 5.17 5.23 5.34 5.73 6.82 6.23 5.17 5.36 5.45 5.38 5.10 

Net interest margin .. 3.89 4.43 4.41 4.43 4.28 3.82 3.17 3.52 4.37 3.83 4.20 3.32 4.73 

Net noninterest 

expense to earning 

assets .. . ........ . 2.16 2.86 2.66 2.63 2.37 1.98 1.51 1.74 2.48 2.13 1.95 2.43 2.93 

Net operating 

income to assets ... 0.07 0.53 0.75 0.62 0.53 - 0.05 -0.89 -0.22 0.88 0.41 0.66 -0.66 -0.05 

Return on assets .... 0.13 0.58 0.81 0.67 0.57 -0.00 -0.81 -0.13 0.93 0.45 0.68 -0.61 -0.01 

Return on equity .... 2.56 6.70 10.61 9.59 8.77 -0.01 -18.29 -2.96 17.16 8.28 11.48 -11.81 -0.32 

Net charge-offs to 

loans and leases ... 0.89 1.14 0.81 0.95 0.92 1.04 0.67 0.61 0.69 0.68 1.57 1.99 1.08 

Growth Rates 

(year-to-year) 

Net charge-offs .. .. . -3.9% -21 .2% -10.8% 16.1% 24.4% 40.6% -26.9% 7.5% 24.8% 5.2% -22.4% -12.8% -11 .3% 

Interest income .. . .. 2.9 -1 .2 3.3 6.0 11 .3 11 .6 3.8 10.2 5.1 1.2 -1 .6 -11 .5 -2.6 

Interest expense . .. . 1.4 -5.7 -1 .3 1.6 7.4 11.2 6.3 11.6 1.4 -1 .9 -4.7 -12.9 -8.3 

Net interest income . . 5.2 4.9 9.3 11 .6 16.6 12.1 -1 .1 7.7 9.8 6.0 2.6 -9.1 4.4 

Loan loss expense .. . 67.5 -23.8 -16.1 5.3 35.7 141 .5 173.8 203.7 23.6 96.1 -19.2 -17.6 42.9 

Noninterest income .. 15.6 10.5 11 .5 13.0 22.9 18.7 23.6 27.3 11 .5 10.1 12.4 4.5 2.0 

Noninterest expense . 7.4 6.2 9.0 10.7 15.5 15.9 9.1 12.6 7.0 5.8 4.1 -0.4 4.3 

Net operating income -84.5 51 .0 28.5 13.6 -3.7 N/M N/M N/M 10.6 -42.3 77.6 N/M N/M 

Net income . . . . . . . . - 78.8 12.6 11 .3 -0.9 -12.1 N/M N/M N/M 0.5 -45.5 -1.4 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 ol 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 chtlrged off (removed from balance sheet because of uncollectibility) during the quarter, less amounts recovered on loans and leases 

previously charged off. 

Nonper1orrning 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. 

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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