uarterlY-----

"_,~~.!!~ls:t~g ij?Xi.l~, 

COMMERCIAL BANKING PERFORMANCE - FIRST QUARTER, 1987 

First Quarter 1987 

FDIC 

Division of Research 

& Strategic Planning 

John Quinn 

(202) 898-3940 

Ross Waldrop 

(202) 898-3951 

Commercial banks earned a record $5.3 billion in the 

first quarter of 1987, up 4.4 percent from first quarter 

1986. Income before securities gains and nonrecurring 

items was $4.4 billion, nearly 10 percent higher than a 

year ago. A major reason for this improvement was a 

12.7 percent decline in loan loss provisions, compared 

to year-earlier levels; a 70 percent reduction in loss provisioning by large Southwest banks accounted for much 

of this drop. First-quarter loss expense for the industry 

was down even more sharply from the last quarter of 

1986-38 percent. It should be noted that loan loss provisions are typically highest during the fourth quarter, 

and that, due to changing tax laws, loss provisions during the fourth quarter of 1986 may have been even 

higher than usual. 

Chart A - Quarterly Net Income of FDIC-Insured 

Commercial Banks 

1984-1987 $ Billions 

5.----------------------, 

2 3 4 2 3 4 2 3 4 1 

1984 1985 1986 1987 

■ Securities & other nonrecurring [ill Net operating income 

gains 

Net interest margins contracted slightly, from 3.93 percent in the year-ago quarter to 3.82 percent for the first 

quarter of 1987, as net interest income growth of 2.6 

percent failed to keep pace with the 6.4 percent increase 

in earning assets. The inability to maintain interest 

margins reflected stagnant commercial loan growth and 

a sizable jump in the amount of loans placed on nonaccrual status, where interest income is not recorded until payment is actually received. These loans increased 

60 percent compared to a year earlier and 45 percent 

compared to the end of 1986. Brazil's announcement, 

on February 20, of a moratorium on external debt 

payments led U.S. banks to place virtually all of their 

medium and long-term loans to Brazil on nonaccrual 

status. The largest banks, with the greatest exposure 

Chart B - Commercial Bank Net Interest Margins 

1983-1987 Basis Points 

600~-,---,---,---,--~~~~-~""T'"---r---r-----r---,----,----, 

300 L._J...._J...._..L,_..J...._...J..._...J..._-'-~-'--'--'-......L..--'---'----'---'--'---' 

12 3412 34 12 34 12 341 

1983 1984 1985 1986 1987 

to Brazil, recorded the sharpest increase in nonperforming assets in the quarter - 86.7 percent over yearago levels. The net effect of this development was flat 

net interest income growth compared to a year earlier, 

putting added pressure on the largest banks' net interest 

margins. 

The number of banks with earnings losses (net income 

less than zero) in the first quarter was 2,019, up from 

1,973 in the same period of 1986. The FDIC's "problem" 

list increased by 52 commercial banks during the 

quarter, to 1,509 as of March 31. Through the first three 

months of 1987, 54 insured commercial banks failed or 

received assistance to avert failure, the most in a single 

quarter since 1933. The smallest commercial banks continue to exhibit the most severe earnings erosion of any 

segment of the industry, reflecting pressures from credit 

problems in energy, agriculture and real estate loans. 

Chart C - Distribution of Return on Asset 

Ratios by Asset Size Groups 

March 31, 1987 

Percent 

100 l"""'T..,..,.,.,.,..,.,-,.,.,..,.,..,..,.,.--..,..,.,..,.,..,.,,.....,..,..,..,.,.,-:-,r-.-,.,,.,..,.,.':":T"--.-:-..,..,.,.:-:-r--, 

·· ··· · 

O <$2SMM $25- $100- $300MM- $1- >$10B 

100MM 300MM 1B 10B 

<0% l!!!!ffio- .75% ~.1s-1 .s% []>1.50/o 

For assistance contact: Section508@fdic.gov
Even with the decline in loan loss provisioning, 

reserves for loan and lease losses were 19 percent 

higher on March 31 than they were a year earlier. 

Many larger banks, particularly those with strong earnings, have continued to fortify their balance sheets 

in the face of high nonperforming asset growth. 

Banks in the largest asset-size group maintained the 

highest ratio of loss reserves to loans outstanding 

of any size group-1.93 percent. Equity capital and 

assets have grown at roughly comparable rates for 

the banking sector as a whole, while reserve growth 

has been much more rapid . The smallest banksthose with less than $25 million in assets-actually 

saw their equ ity capital shrink slightly in the quarter, 

under pressure from persistent high levels of loan 

losses. 

Chart D - Selected Growth Indices 

1984-1987 Index 

220~~---~~-~-~--~-~--~ 

12 

100 ···Assets""t· 

00'----'--~----'-- '---'-I-'--__.____,____,__.___,____,____,__'------' 

4123 4 123412341 

1983 1984 1985 1986 1987 

Note: Year- end 1983 - 100 

Net loan losses increased more rapidly than loss 

reserves at commercial banks in the first quarter, 

especial ly among medium-sized banks in the 

Southwest. Banks in the Midwest and Southwest still 

show the highest regional levels of loan charge-offs, 

while Southwest and Northeast banks experienced 

the sharpest growth in charge-offs during the quarter. 

Banks in the Northeast region had the sharpest runup in their proportion of nonperforming assets, as 

foreign loans on nonaccrual status at commercial 

banks stood at approximately $25.1 billion at the end 

of the first quarter. 

The Southwest region had the highest proportion of 

unprofitable banks in the first quarter, 27 percent. 

Losses in the region 's larger-bank segment were 

lower, as loan loss expenses were reduced much 

below year earlier levels. The modest profitability 

reported by smaller banks in the first quarter of 1986 

eroded to almost zero last quarter. In the West region , 

larger banks boosted loss reserves; the region's 

smaller banks had less robust reserve expansion, 

which, combined with a shrinkage in their equity 

ratio, produced a decline in the level of primary 

capital. Banks in the Midwest region showed significant improvement in profitability, as lower loss provisioning offset narrower interest margins; although 

nonperforming assets grew slightly, there was no 

evidence of further significant deterioration in asset 

qual ity. Total assets at Midwestern banks grew 6.2 

percent in the twelve months ending March 31 , but 

loans and leases increased by only 2.6 percent; farm 

loans outstanding were 18.6 percent lower than a 

year earl ier. 

Chart E - Distribution of Bank Return on Asset 

Ratios by Geographic Region 

March 31, 1987 Percent 

100,.....,,..,.,.,.,,...-""l".".'"~-r,.,.,.-:,--l":"."'.""."'T""7"'.,.,.-:ir,.,.,.,-:-r-T"'.'=, 

80 

60 

40 

20 

0 

W SW MW C SE NE ALL 

<0% fflo- .75% ~ .75-1.5% 0 >1.5% 

The Northeast, Southeast and Central regions had 

the fewest troubled institutions, and showed continued improvement in this area. Banks in the eastern 

half of the U.S. have had fewer credit-quality problems and stronger asset growth than their western 

counterparts. Asset-quality problems at the larger 

banks in the Northeast pulled down that region 's aggregate profitability, while the Southeast and Central regions showed the strongest asset quality and 

earnings. As commercial banks have continued to fail 

at a record pace, western banks have accounted for 

an increasing proportion of the failures, and probably 

will continue to do so through the remainder of 1987. 

Chart F - Distribution of Problem Banks 

by Asset Size and Region 

March 31, 1987 

Percent of banks (in size range and region) 

20 ~-----------------~ 

16 

12 

8 

0 All Banks 0-25 25 - 100 100-500 500+ 

Bank Assets Size Ranges (in $ millions) 

[ill] East (Total Number of banks - 6,080) ■ West (Total Number of banks= 7,956) 

Includes commercial banks on the FDIC n Problem Ltsl " . East/West separated by

Mississippi River . 

For the banking industry overall, the outlook for 

reported earnings in 1987 is far from impressive. The 

increase in nonperforming assets will mean higher 

loan loss provisions during the rest of 1987. Already, 

a number of major banks have announced unprecedented additions to their loan loss reserves for 

the second quarter, and more banks are expected to 

follow. At the same time, higher interest rates in the 

second quarter will further compress margins, given 

the industry's increasing liability sensitivity. Aggregate second quarter earnings are expected to 

show a record decline. However, performance will 

continue to vary markedly among different regional 

and size groups. Once loan loss adjustments are 

behind them, banks likely will show significant earnings improvement toward the end of the year. 
Table I. Aggregate Condition and Income Data, FDIC-Insured Commercial Banks 

(dollar figures in millions) 

Preliminary 

1st Qtr 4th Qtr 1st Qtr % Change 

1987 1986 1986 86:1-87:1 

Number of banks reporting ........... . ... . ... ...... ............. . 14,061 14,198 14,376 -2.2 

Total employees (full-time equivalent} ........ .. .. ... . . . ... ......... . 1,555,400 1,562,710 1,562,965 -0.5 

CONDITION DATA 

Total Assets . ....... . . ................... . . . .... . . . . ......... . . $2,002,079 $2,940,940 $2,729,941 6.3 

Real estate loans ... ... .................. . ... . . . . ...... .... . 532,498 515,214 451 ,587 17.9 

Commercial & industrial loans ........ . ..... . ..............•. . 585,531 600,860 580,111 0.9 

Loans to individuals .... ...... ............... ... .. .......... . 328,776 335,741 308,846 6.5 

Farm loans ... ... ..........••• . ..... . .. . ..... .. . . . . ...... .. 29,250 31 ,694 34,366 -14.9 

Other loans and leases . .. .. ..... ..... ... .. ......... .. .. . ... . 263,725 272,972 266,461 -1 .0 

Total loans and leases .. ..... ..• .. ............ .. ........... .. 1,739,780 1,756,481 1,641,371 6.0 

LESS: Reserve for losses ....... ..... ..... ......... . ...... .. . 29,654 28,786 24,881 19.2 

Net loans and leases ...... . . . .. .... .... ......... .. . . . . . ...... . 1,710,126 1,727,695 1,616,400 5.8 

Temporary investments .. ......... . ..... ... . . ......... . ..... . . . 450,521 463,510 457,697 -1.6 

Securities over 1 year ....... .. . . .. . ... .. . .. ... . . .. . . ......... . 366,915 357,618 300,915 21.9 

All other assets ..... . ... . . ... . . ........ ... . ... .............. . 374,517 392,117 354,838 5.5 

Total liabilities and capital .......... .. .... ..... . . . ... . ... .... .. .. . $2,002,079 $2,940,940 $2,729,941 6.3 

Noninterest-bearing deposits ......... . ...... . . . . . .............. . 462,871 532,291 437,975 5.7 

Interest-bearing deposits .... . ...... . .. . .. ........ .... . ... .. ... . 1,779,531 1,750,948 1,675,830 6.2 

Other borrowed funds . . . ..... . .... . ... ... ... . .. .. . .. ......... . 348,645 358,893 319,612 9.1 

Subordinated debt ....... . ....... .. ... ..... .. . ... . ...... .... . . 17,171 16,891 15,468 11.0 

All other liabilities . ..... .......... .... .... . . . . . .. . . . • . ........ 107,110 99,472 107,878 -0.7 

Equity capital . .. ......... . . . ..... ... . . . ....... ... ... ... . .... . 186,751 182,445 173,178 7.8 

Nonperforming assets ...... ...... . .. .... ... ............ ... •. .. •• 76,422 57,591 54,375 40.5 

Loan commitments and letters of credit . ... ... . . .... .. ..... ....... . 752,554 751,464 725,585 3.7 

Domestic office assets ....... . . ...... . .. ..... . .. . . ..... ........ . 2,474,144 2,532,782 2,310,939 7.1 

Foreign office assets ... . . ...... ............. . ... ............... . 427,935 408,158 419,002 2.1 

Domestic office deposits ...... . .... . . . ..... ... . . . .. .... . ........ . 1,910.082 1,969,444 1,780,620 7.3 

Foreign office deposits .. .... ................... . . . ............. . 332,320 313,795 333,185 -0.3 

Full Year Full Year Preliminary 

INCOME DATA 1986 1985 % Change 1st Qtr 1987 1st Qtr 1986 % Change 

Total interest income . .............. . $237,797 $248,210 -4.2 $58,452 $62,340 -6.2 

Total interest expense . ....... ..... . . 142,808 157,300 -9.2 34,329 38,838 -11 .6 

Net interest income .... . .. ..... .. . 94,989 00,910 4.9 24,123 23,502 2.6 

Provisions for loan losses .. . .. . ..... . 21,910 17,717 23.7 4,083 4,675 -12.7 

Total noninterest income .... ........ . 35,896 31,037 15.7 9,405 8,417 11.7 

Total noninterest expense .. ... . ..... . 00,182 82,320 9.6 23,146 21,656 6.9 

Applicable income taxes .... . .. . . . . . . 5,315 5,644 -5.8 1,898 1,581 20.1 

Net operating income ......... . .. . . 13,478 16,266 -17.1 4,401 4,007 9.8 

Securities gains, net ... ...... ....... . 3,925 1,567 150.5 800 961 -16.8 

Extraordinary gains, net ... . .. ... .... . 270 224 20.5 89 101 -11.9 

Net Income .......... . ...... .... . 17,673 18,057 -2.1 5,200 5,069 4.4 

Net charge-0ffs .. ........ ......... . . 16,489 13,245 24.5 3,268 3,021 8.2 

Net additions to capital stock .. .. .... . 3,231 2,395 34.9 273 151 80.8 

Cash dividends on capital stock .... .. . 9,226 8,529 8.2 2,322 2,004 15.9 

Table II. Selected Indicators, FDIC-Insured Commercial Banks 

1981 1982 1983 1984 1985 1986 1987' 

Return on assets . . . . . . . . . . . . . . . 0.78% 0.71% 0.66% 0.65% 0.70% 0.64% 0.72% 

Return on equity . . . . . . . . . . . . . . . 13.08 12.11 10.70 10.73 11 .31 10.10 11.46 

Equity capital to assets . . . . . . . . . 5.83 5.87 6.00 6.15 6.20 6.20 6.44 

Primary capital to assets . . . . . . . . 6.39 6.47 6.59 6.98 6.94 7.03 7.34 

Nonperforming assets to assets . . NIA 1.85 1.97 1.97 1.87 1.95 2.62 

Net charge-0ffs to loans . . . . . . . . . 0.37 0.56 0.67 0.76 0.84 0.98 0.75 

Asset growth rate . . . . . . . . . . . . . . 9.36 8.12 6.75 7.11 8.86 7.62 6.31 

Net operating income grow1h . . . . . 7.60 -0.62 -3.69 3.40 6.30 -17.10 9.83 

Number of unprofitable banks . . . . 741 1,206 1,599 2,035 2,451 2,824 2,019 

Number of problem banks . . . . . . . 196 326 603 800 1,098 1,457 1,509 

Number of failed banks . . . . . . . . . 7 34 45 78 118 144 54 

*For 1987, return on assets, return on equity and net charge-0ff ratios are annualized. 

NIA - Not available 
Table IV. Full Year 1986 Bank Data (Dollar figures in billions, ratios in %) 

Asset Size Distribution Geographic Distribution 

EAST WEST Less Greater 

than $25 $25-100 $1()().300 $300-1,000 $1-10 than $10 Northeast Southeast Central Midwest Southwest West 

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

Number of banks 

reporting . . . .. . . .. .. . 14,198 4,823 6,583 1,902 550 307 33 1,080 1,957 3,124 3,318 3,139 1,580 

Total assets .. . . . ... . $2,941 .0 $71.1 $333.6 $305.0 $276.7 $899.2 $1,055.4 $1,133.4 $381 .8 $463.7 $206.4 $301.7 $454.0 

Total deposits ........ 2,283.1 63.1 299.0 269.2 232.7 682.0 737.1 826.2 305.1 371 .0 161.3 246.3 373.2 

% total banks .... . ... 100.0% 33.9% 46.4% 13.4% 3.9% 2.2% 0.2% 7.6% 13.8% 22.0% 23.4% 22.1% 11.1% 

Asset share (%) . . .... 100.0 2.4 11.3 10.4 9.4 30.6 35.9 38.5 13.0 15.8 7.0 10.3 15.4 

Deposit share (%) . ... 100.0 2.8 13.1 11.8 10.2 29.8 32.3 36.2 13.4 16.2 7.1 10.8 16.3 

Number of 

unprofitable banks .. . 2,824 1,439 1,074 227 64 19 1 71 220 238 711 1,123 461 

Number of failed 

banks ......... . .. .. 144 79 54 8 2 1 0 0 7 5 48 54 30 

Performance ratios 

Yield on earning assets 9.96% 10.61% 10.33% 10.11% 10.26% 9.65% 9.77% 9.65% 10.02% 9.61% 10.30% 9.47% 10.09% 

Cost of funding 

earning assets ... . .. 5.98 5.92 5.88 5.72 5.77 5.59 6.38 6.08 5.63 5.79 6.00 5.95 5.56 

Net interest margin .. . 3.98 4.69 4.45 4.39 4.49 4.05 3.39 3.57 4.39 3.82 4.30 3.52 4.53 

Net noninterest to 

expense to earning 

assets ............. 2.27 3.30 2.84 2.70 2.73 2.31 1.69 1.89 2.61 2.17 2.08 2.39 2.77 

Net operating 

income to assets . ... 0.49 -0.03 0.41 0.60 0.50 0.64 0.16 0.64 0.88 0.77 0.40 -0.53 0.24 

Return on assets .... . 0.64 0.15 0.59 0.76 0.65 0.76 0.23 0.78 1.02 0.88 0.73 -0.32 0.34 

Return on equity .... . 10.10 1.54 7.07 10.19 9.45 12.48 11.22 13.44 15.18 12.63 9.87 -4.73 6.13 

Net charge-offs to 

loans and leases .... 0.98 2.05 1.48 1.07 1.08 0.80 0.93 0.62 0.62 0.69 2.09 2.08 1.20 

Condition Ratios 

Loss allowance to 

loans and leases . ... 1.63% 1.75% 1.53% 1.46% 1.59% 1.46% 1.83% 1.48% 1.29% 1.44% 1.93% 2.30% 1.86% 

Nonperforming assets 

to assets . . .. .... . .. 1.95 2.60 2.17 1.88 1.91 1.46 2.29 1.54 1.02 1.30 2.01 4.08 2.99 

Equity capital ratio .... 6.20 9.59 8.13 7.27 6.73 5.94 5.14 5.81 6.57 6.79 7.14 6.45 5.68 

Primary capital ratio .. . 7.03 10.42 8.88 7.97 7.51 6.60 6.19 6.58 7.07 7.51 8.10 7.68 6.73 

Net loans and leases 

to assets . ... .. ... . . 58.74 48.21 50.47 54.43 59.24 60.49 61.69 59.62 57.57 56.16 52.09 55.01 65.69 

Net assets repriceable 

in one year or less 

to assets ........... -4.83 -5.30 -7.29 -6.65 -6.57 -3.84 -3.87 -3.16 -9.37 -3.56 -10.94 -6.35 -2.67 

Growth Rates (year to year) 

Assets . .. ... . . ...... 7.7% 6.0% 7.9% 10.8% 12.4% 16.2% 6.7% 11.0% 13.9% 7.5% 7.0% -0.9% 1.9% 

Earning assets ... .. .. 7.9 6.2 7.7 10.5 12.0 16.3 7.4 11.9 14.3 7.0 7.3 -0.8 0.8 

Loans and leases ..... 7.7 3.5 4.9 9.1 13.6 18.3 7.3 12.6 14.6 8.2 4.0 -4.6 1.5 

Loss reserve .. ..... . . 23.5 15.1 18.6 23.6 33.1 31 .0 29.0 23.2 17.4 13.8 23.4 39.1 24.8 

Net charge-offs ...... . 24.2 4.0 9.7 24.0 44.9 23.2 29.1 40.8 21 .0 7.4 26.9 42.3 4.8 

Nonperforming assets . 12.7 14.0 15.7 18.3 33.5 17.8 16.4 10.8 9.2 -6.1 -2.9 47.3 8.0 

Deposits .... .. ...... 7.8 7.0 8.5 11 .5 13.4 15.9 6.9 11 .8 14.1 7.4 5.5 -1.5 2.9 

Equity capital . ... . ... 7.9 0.3 4.8 8.2 10.3 15.9 10.2 13.7 13.6 7.3 4.1 -6.8 4.7 

Interest income . ..... -4.2 -16.4 -8.9 -5.3 -1 .6 -4.5 -2.1 -2.6 3.0 -4.4 -3.9 -11.1 -8.1 

Interest expense ... ... -9.2 -18.8 -12.1 -9.4 -6.4 -9.2 -8.9 -8.5 -0.9 -9.3 -7.5 -12.5 -15.1 

Net interest income ... 4.5 -13.3 -4.4 0.7 5.2 2.7 13.8 9.5 8.4 4.2 1.6 -8.7 2.2 

Loan loss expense . . .. 23.0 -3.9 4.3 21 .3 41 .6 27.9 25.8 33.5 10.4 0.2 19.9 60.9 5.3 

Noninterest income . . . 15.6 -2.8 -0.2 8.9 9.4 4.7 32.2 21 .3 12.9 15.1 27.5 -2.7 10.9 

Noninterest expense .. 9.5 -8.6 0.7 4.7 6.6 5.0 21.5 15.5 11 .3 6.8 9.5 2.7 3.8 

Net operating income . -16.2 -117.1 -35.4 -19.7 -25.6 -16.6 4.8 -0.3 3.7 6.7 -29.9 -267.1 -6.7 

Net income . ........ . -1 .3 -52.0 -18.4 -7.5 -12.0 -6.0 24.8 10.8 14.6 13.9 13.3 -175.8 6.8 

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

Asset Size Distribution Geographic Distribution 

Less Greater EAST WEST 

than $25 $25-100 $100-300 $300-1,CXXJ $1 -10 than $10 Northeast Southeast Central Midwest Southwest West 

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

Number of banks 

reporting ....... . ... . 14,061 4,765 6,585 1,853 524 303 31 1,073 1,937 3,086 3,303 3,097 1,565 

Total assets ......... $2,902.0 $70.4 $333.8 $298.0 $262.6 $900.4 $1,037.0 $1,131.4 $379.3 $455.2 $202.4 $293.5 $440.3 

Total deposits ... . .... 2,242.4 62.5 298.9 262.7 219.8 681.6 716.8 813.7 303.7 366.4 15 8.7 240.2 359.8 

% total banks .... . . .. 100.0% 33.9% 46.8% 13.2% 3.7 % 2.2% 0.2% 7.6% 13.8% 22.0% 23.5% 22.0% 11.1% 

Asset share (%) . ..... 100.0 2.4 11 .5 10.3 9.1 31 .0 35.7 39.0 13.1 15.7 7.0 10.1 15.1 

Deposit share (%) . . .. 100.0 2.8 13.3 11 .7 9.8 30.4 32.0 36.3 13.5 16.3 7.1 10.7 16.1 

Number of 

unprofitable banks ... 2,019 1,095 734 140 37 10 3 64 173 171 446 832 333 

Number of failed 

banks .............. 54 38 13 3 0 0 0 1 2 4 8 33 6 

Income ratios 

(annualized) 

Yield on earning assets 9.25% 9.70% 9.46% 9.32% 9.41% 8.98% 9.33% 9.29% 9.31% 8.91% 9.48% 8.73% 9.46% 

Cost of funding 

earning assets . .. ... 5.43 5.17 5.17 5.05 5.03 4.99 6.16 5.84 5.00 5.19 5.36 5.41 4.92 

Net interest margin . .. 3.82 4.52 4.29 4.27 4.38 3.99 3.17 3.45 4.31 3.72 4.12 3.32 4.54 

Net noninterest to 

expense to earning 

assets .... . ....... . 2.17 3.15 2.70 2.59 2.55 2.24 1.63 1.81 2.46 2.07 1.96 2.28 2.93 

Net operating 

income to assets ... . 0.61 0.32 0.66 0.75 0.70 0.74 0.43 0.61 0.97 0.83 0.74 --0.08 0.44 

Return on assets . ... . 0.73 0.44 0.80 0.89 0.84 0.84 0.56 0.73 1.08 0.94 0.85 0.12 0.53 

Return on equity ... .. 11 .36 4.63 9.68 11 .91 11.73 14.03 10.61 12.36 16.05 13.63 11.70 1.82 9.06 

Net charge-offs to 

loans and leases . . .. 0.75 1.20 0.78 0.66 0.85 0.63 0.83 0.55 0.45 0.45 1.42 1.52 1.00 

Condition Ratios 

Loss allowance to 

loans and leases .... 1.70% 1.82% 1.61 % 1.51 % 1.61 % 1.53% 1.93% 1.57% 1.32% 1.50% 2.01 % 2.41% 1.93% 

Nonperfonning assets 

to assets ...... . .... 2.62 2.72 2.30 2.01 1.99 1.84 3.73 2.60 1.15 1.56 2.25 4.62 3.95 

Equity capital ratio .... 6.40 9.67 8.34 7.57 7.21 6.15 5.31 6.01 6.85 7.05 7.40 6.58 5.96 

Primary capital ratio ... 7.34 10.53 9.13 8.35 8.02 6.87 6.40 6.83 7.40 7.81 8.41 7.87 7.07 

Net loans and leases 

to assets .. . .. . .. .. . 58.93 47.96 50.78 54.64 60.87 62.09 59.99 59.26 58.99 56.84 52.10 54.95 65.94 

Net assets repriceable 

in one year or less 

to assets ... . .. . .. . . -6.55 -6.76 -8.83 -7.80 -7.43 -6.22 -5.48 -5.26 - 10.64 -5.19 -13.28 -8.03 -3.59 

Growth Rates 

(from year-ago quarter) 

Assets ..... . .... ... . 6.3% 5.7% 6.6% 8.8% 10.4% 14.3% 6.0% 9.6% 11.8% 6.6% 6.2% -1 .6% --0.6% 

Earning assets ...... . 6.4 6.1 7.1 9.4 10.5 14.9 5.5 10.3 11 .9 5.9 6.1 -1 .6 --0.6 

Loans and leases ... . . 6.0 3.3 4.6 9.1 13.3 16.2 4.6 10.6 14.5 7.0 2.6 -6.6 -1 .2 

Loss reserve . . . . . . . . . 19.2 17.3 18.5 22.9 30.0 20.3 27.0 23.0 16.4 13.2 12.4 17.6 21 .9 

Net charge-offs . . .. . .. 8.2 3.9 -2.3 17.4 58.8 6.6 14.4 19.7 13.6 - 13.2 -3.7 19.8 2.0 

Nonperfonning assets . 40.5 1.9 6.2 17.7 23.0 29.6 86.7 84.6 18.2 3.5 -5.0 43.1 27.9 

Deposits . . .......... 6.1 6.8 7.2 9.4 10.9 13.5 6.4 10.2 12.1 6.1 4.7 -2.4 -0.4 

Equity capital .. . . . ... 7.8 -0.3 4.3 8.2 8.4 15.4 11.7 13.7 12.9 6.8 4.5 -6.6 4.2 

Interest income .... . . -6.2 -6.5 -5.8 -3.2 -0.8. 1.0 -7.0 -2.1 --0.4 -6.6 -8.3 - 15.8 -12.4 

Interest expense . . . .. . -11 .6 -11 .8 -11 .0 -9.1 -8.8 -7.1 - 10.4 -7.0 -7.5 -12.3 -12.1 -17.6 -21.3 

Net interest income ... 2.6 -0.5 -1.3 4.9 10.4 13.4 0.5 7.6 9.2 2.8 -2.9 -12.7 -0.2 

Loan loss expense .. . . -12.7 -2.8 -9.2 5.4 10.9 -28.4 3.7 18.1 -4.2 -13.1 -30.2 38.7 -10.6 

Noninterest income . . . 11 .7 -7.8 9.9 9.5 16.8 13.5 16.7 11.9 14.6 14.7 39.4 5.1 .6 

Noninterest expense . . 6.9 4.0 5.4 7.2 11 .4 11 .6 12.5 10.7 9.7 5.5 7.0 -1 .3 3.5 

Net operating income . 9.8 -14.31 -6.0 -5.1 - 2.8 -56.3 -11.4 -2.8 8.6 8.8 68.6 72.4 -4.2 

Net income . ...... .. . 4.4 -22.6 -13.0 -4.6 3.8 43.4 -12.8 -4.3 8.8 5.0 20.0 293.7 -6.7 
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FDIC-616 

NOTES TO USERS 

Computation Methodology for Performance and Condition Ratios 

All income figures used in calculating performance ratios represent amounts for that quarter, annualized. 

All asset and liability figures used in calculating performance ratios represent average amounts (beginning-of-period amount plus end-of-period amount, divided 

by two). 

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

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 but before gains (or losses) from securities transactions and 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. A 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 due to uncollectibility, less amounts recovered on previous charge-offs. 

Nonperlorming Assets - the sum of loans past.<Jue 90 days or more, loans in nonaccrual status and 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, 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 - short-term and variable rate interest-earning assets, minus interest-bearing liabilities maturing or repriceable 

within the same one-year interval. A measure of banks' sensitivity to interest rate changes, where 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. These are banks' more liquid investments. 

Loan Loss Expense - the addition to the allowance for loan and lease losses, the reserve maintained to absorb expected 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 Division 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 Division 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 

Division of Research and Strategic Planning 

Federal Deposit Insurance Corporation 

550 17th Street, N.W. 

Washington, DC 20429