Second Quarter 1989 

FDIC 

Division of Research 

& Statistics 

John Quinn 

r ''18-3940 

Jaldrop 

(~..., 1!98-3951 

The FDIC 

uarterlY-_______L_.w_·_,m_am_S_e_id_m_an_,C_h_a_irm_a_n 

anking Profile 

COMMERCIAL BANKING PERFORMANCE -SECOND QUARTER 1989 

• Bank Earnings Remain Strong - First-Half Earnings Highest Ever 

• Banks Boost Net Worth Ratio to Pre-1987 Level 

• Asset Quality Problems Move East 

• Southwest Banks Register Loss, But Turnaround May Be Imminent 

• Number of Problem Banks Reaches Lowest Level in Three Years 

Commercial banks earned $7 billion in the second Chart B - Quarterly Net Interest Margins 

quarter, down from the $7.3 billion earned in the first 1983-1989 

Net Interest Margin (%) quarter, but 30.7 percent above the $5.4 billion earn­ 5.0 r-----.-------.---r----,c--------,----.---, ed in the second quarter of 1988. For the first six 

months of 1989, industry net income totalled $14.3 

billion, the most ever earned in a six-month period. 

Equity capital increased by $9.8 billion during that 

period, with $4.6 billion added during the second 4.5 

quarter. Asset quality showed some overall improvement, as nonperforming assets ended the first half 

below the level of a year ago, but regional trends 

were mixed. In a reversal of recent experience, 4.0 nonperforming asset levels fell in the three regions 

west of the Mississippi River, and rose in the three 

eastern regions. 

Continuing improvement in net interest income, 3.5 ~~~-~~~~~~~~~~~~~

1983 1984 1985 1986 1987 1988 1989 strong gains in noninterest income, and reduced 

loan-loss expenses were key factors in the record earnings results. Earning assets were only 4.8 percent higher than a year earlier. Growth was led by Chart A - Quarterly Net Income of real-estate loans, up 12.8 percent from a year ago, FDIC-Insured Banks, 1985-1989 and consumer loans, up 6.0 percent. Funding 

shifted slightly from deposits, up 4.1 percent yearto-year, to nondeposit liabilities, up 7.1 percent. With 

interest rates mostly stable during the second 

quarter, smaller banks were able to increase their 

net interest margins over first-quarter levels. Larger 

banks' margins remained essentially unchanged. 

$ BIIUons 

Banks' aggregate loan-loss reserves have declined 

in each quarter after peaking in the first quarter of 

1988. Large banks in particular have steadily increased their equity capital as a percentage of total 

assets, aided by strong earnings and prompted by 

new risk-based capital requirements. Because of 

this, the growth in the industry's equity capital has 

more than offset a decline in loss reserves, so that 

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 the cushion of equity and reserves has increased 

1985 1986 1987 1988 1989 relative to nonperforming assets. 

For assistance contact: Section508@fdic.gov
The increase in nonperforming assets in the eastern 

regions has come from troubled loans to develop­

;-,g countries and real estate. The 20 percent writedow~ of loans to Argentina that was mandated in 

the second quarter was the main reason that banks 

in the Northeast and Central regions had a higher 

quarterly charge-off rate than in the second quarter 

of 1988. Banks in the other four regions had lower 

charge-off rates than a year earlier. The decline in 

asset quality has been greatest in the Northeast 

region, with banks in the Central and Southeast 

regions reporting only slight increases in the 

percentage of nonperforming assets. The Northeast 

was the only region to show a year-to-year increase 

in the proportion of banks losing money. 

Chart C - Distribution of Banks by Problem Asset 

Coverage Levels and Asset Size 

June 1987 & June 1989 

100 

75 

50 

25 

0 6/87 6/89 6/87 6/89 6/87 6/89 6/87 6/89 6/87 6/89 

Percent of Banks with Capital Plus Reserves: 

■ Less Than Nonpertonning Assets ffl!II 1- 5 Times Nonpertonning Assets 

LJ 5 -10 Times Nonpertonning Assets CJ Over 10 Times Nonpertonning Assets 

Recent trends in Southwest bank performance suggest that the prolonged deterioration of that region's 

banking sector may have finally ended. The improvement in asset-quality indicators in the Southwest 

region is especially encouraging, even though much 

of the improvement is attributable to FDIC intervention in failure and assistance transactions in recent 

years. Second-quarter net charge-offs were almost 

two-thirds lower than a year earlier, and nonperforming assets declined by 27.6 percent. The percentage of banks with earnings losses has been 

declining in recent quarters. Southwest banks still 

have the highest percentage of nonperforming 

assets, more than twice the national average, as 

well as the highest percentage of banks on the 

FDIC's "Problem List." 

The number of commercial banks fell during the 

quarter, as the industry continues the consolidation 

process begun in 1985. The 12,944 banks operating 

at the end of June was a record low since the creation of the FDIC in 1934. A continued high rate of 

bank failures, a lower rate of new bank charters, and 

conversion of multibank holding company subsidiaries into branches have contributed to reducing the number of commercial banks. Despite this 

shrinkage, the total number of banking offices has 

continued to grow. 

In the first six months of 1989, 101 banks failed or 

received assistance to avert failure, the same 

Chart D - Numbers of FDIC-Insured Commercial 

Banks & Branches, 1969-1989 

Thouunda BANKS r"°"..""' BRANCHES 

15--------

13 

121.J...J....1...J....1....L...LJ....L.L.1...J....1....L...LJ...L..L.LL.LJ 

12/59 12/74 12/79 12/84 S/89 12/74 12/79 12/84 S/89 

13,473 14,230 14,354 14,495 12,944 20,348 28,529 36,466 41,907 47,761 

number as in the first half of 1988. For the second 

half of 1989, the failure rate is expected to moderate, 

with the average asset size of failed institutions well 

below the average for failed banks in 1988. This expectation is based on the continuing decline in the 

number of "problem" banks since midyear 1987. 

The 1,256 commercial banks on the "Problem List" 

is the fewest since June 1986. 

The outlook for bank performance in the remainder 

of 1989 is clouded by uncertainties as to the earnings impact of the recently completed Mexican debt 

restructuring. The outlook for other developingcountry loans remains problematic. The continuing 

rapid expansion of domestic real-estate loan portfolios, in the face of rising nonperforming rates in 

some areas, may portend more losses ahead. The 

recent economic climate, characterized by positive 

economic growth and low interest-rate levels, has 

been largely favorable for asset quality. Any adverse 

changes in these conditions could exacerbate current asset problems and trigger losses, especially 

in commercial credits extended in highly-leveraged 

transactions. At this point it is uncertain whether 

full-year earnings will exceed the all-time record of 

$25.1 billion earned last year. 

Chart E - Percent of Banks on "Problem List" 

by Region, June 1987 & June 1989 Percent 

30 •••••••••••••••••••••••••••••••• • •••••20_3 •••••••••• • 

20 ••• • •••• • •••••••••••••••••••••••••• 

10 •.••... •.. .••• •• ••..••..•. 

/ 

6/87 6/89 6/87 6/89 6/87 6/89 6/87 6/89 6/87 6/89 6/87 6/89 

NORTHEAST SOUTHEAST CENTRAL MIDWEST SOVTHWEST WEST 

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

1989. 1988. 1988 1987 1986 

Return on assets .. .. ... .. . .... ....• .. .... 0.91% 0.69% 0.83% 0.12% 0.63% 

Return on equity . . .... ... . ..... . ... . .... . . 14.22 11.35 13.37 2.00 9.94 

Equity capital to assets . ........•••••.... . . 6.44 6.15 6.28 6.04 6.20 

Primary capital ratio ... .................... 7.99 7.86 7.85 7.70 7.22 ) Nonperforming assets to assets ..... . ....... 2.25 2.39 2.14 2.46 1.94 

Net charge-offs to loans ............ . ... .. .. 0.87 1.00 0.99 0.92 0.98 

Asset growth rate . ..... ... ... ..... ... . .. .. 4.95 4.92 5.68 2.03 7.71 

Net operating income growth ....... .. ... . .. 47.98 N/M 1666.92 -85.27 -20.65 

Percentage of unprofitable banks . .. .. . .. .. . . 9.72 13.46 14.44 17.66 19.79 

Number of problem banks .................. 1,256 1,455 1,394 1,559 1,457 

Number of failed/assisted banks ..... . .... . .. 101 101 221 201 144 

•Through June 30; ratios annualized where appropriate. N/M-Not meaningful 

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

(dollar figures in millions) 

Preliminary 

2nd Otr 1st Otr 

1989 1989 

Number of banks reporting . ... .... . ..... .. . . ...... . ... ... ....... . 12,944 13,003 

Total employees (full-time equivalent) .............................. . 1,544,594 1,526,179 

CONDITTON DATA 

Total assets . ........ . . .. .... .. . .... .......... .. . .... .... ..... . $3,207,318 $3,150,604 

Real estate loans . ..... . . ....... ...... ... . .. . . ... .. . ... . ... . 719,640 695,032 

Commercial & industrial loans ...... .... .. ..... . .. . . . . .. .. . .. . 612,341 604,348 

Loans to individuals ........................... . ... ... ...... . 379,152 371 ,494 

Farm loans . .... .. . ..... .... .. .. ..... ..... . . . ..... .... .. .. . 31 ,048 28,729 

Other loans and leases .......................... . ........ . . . 246,958 247,327 

Total loans and leases . ...................... . .... .... . . .... . 1,989,139 1,946,929 

LESS: Reserve for losses .. . . . ........ .. ...... .. . ........ ... . 45,065 45,891 

Net loans and leases . .......... ... ......... . ....... ..... ..... . 1,944,074 1,001,037 

Temporary investments ..... ...... .... ..... .... ... . . . ..... . ... . 478,735 484,320 

Securities over 1 year . .......•......... . ..... .. ...... ... ... ... 394,640 386,505 

All other assets ... ..........•...... .. ........... . .... .... .... 389,869 378,741 

Total liabilities and capital .... ... .... .. ... . ..... .. . . .. ..... .. . ... . 3,207,318 3,150,604 

455,846 440,200 

1,997,018 1,988,462 Noninterest-bearing deposits . .. ........................... . ... . . 

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

Other borrowed funds . ........ .. . ..... ........ . . .. . ... ....... . 420,674 399,338 

Subordinated 17,684 17,350 debt ... . .. . ........ . ....... . . ... . ... . ......... . . 

All other 109,568 103,339 liabilities ........ . . .. . .. . ................. ..... ..... . 

Equity 206,527 201,916 capital .. .... .. ...... .. . .. .. . ......... ... .. .... ... . . .. . 

Primary 255,227 251,671 capital ....... . ..................... . . . ............ . .. . . 72,052 69,503 

849,830 837,726 Nonperforming assets ... .... ........ . . ... . ..... . . . ... ......... . . 

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

Domestic office assets ..... . . . ..... ... ............ .. ........... . 2,788,717 2,736,044 

Foreign office 418,601 414,560 assets ... . .. . .... ...... . ... . ..................... . 

Domestic office deposits 2,129,554 2,103,810 ... . .. .... ... . . ... . ..... .. .... ... ..... . . . 

Foreign office deposits 323,311 324,852 ... . ..... ... ............. . . .. .. .......... . 

Earning 2,817,449 2,771,863 assets . ........ . ..... ......... ............ . . ... .. ..... . 

Volatile 1,138,678 1,116,099 liabilities .... . .. ...... . . . ... ....... . ... ........ . .. . .. .. . 

Preliminary Preliminary 

INCOME DATA First Half First Half 2nd Otr 

1989 1988 %Change 1989 

Total interest income ... .... . . .... .. . .. ... . $155,511 $129,450 20.1 $80,177 

Total interest expense ... . .. ... ···· ·······. 99,326 78,095 27.2 51 ,945 

Net interest income ......... .. . .. •....• . 56,185 51,355 9.4 28,232 

Provision for loan losses ..... ...... ...... .. 7,983 9,203 -13.3 4,383 

Total noninterest income . ... .... .. .. . .. .... 24,544 22,144 10.8 12,829 

Total noninterest expense ........ ... . ..... . 52,850 50,000 5.5 26,977 

Applicable income taxes . ... .. ..... .. ...... 5,005 4,791 24.5 2,981 

Net operating income . . ... .... ... . .. ... . . 13,932 9,415 48.0 6,720 

Securities gains, net . ....... . . ... .. .... .... 212 534 -60.3 161 

Extraordinary gains, net .. . ....... ········ .. 178 436 -59.1 148 

Net income ....... . .. ... ... .. . ....... .. 14,322 10,385 37.9 7,028 

Net charge-offs . ..... ... ... ... ... . . . ....• . 8,529 9,298 -8.3 5,053 

Net additions to capital stock ..... . ... ...... 314 347 -9.4 114 

Cash dividends on capital stock . ......... .. • 6,675 6,086 9.7 3,504 

1985 

0.70% 

11.31 

6.20 

6.91 

1.87 

0.84 

8.86 

6.30 

17.09 

1,098 

118 

Banks 

2nd Qtr 

1988 

13,411 

1,536,763 

$3,055,956 

638,107 

599,454 

358,255 

30,617 

256,422 

1,883,077 

49,305 

1,833,771 

467,712 

387,746 

366,728 

3,055,956 

463,096 

1,893,216 

391,125 

17,206 

103,438 

187,875 

240,967 

72,001 

813,634 

2,638,775 

417,181 

2,027,100 

329,122 

2,689,228 

1,070,636 

2nd Otr 

1988 

$65,751 

39,722 

26,029 

4,589 

11,131 

25,218 

2,424 

4,930 

142 

306 

5,378 

5,305 

144 

2,006 

1984 

0.65% 

10.73 

6.15 

6.91 

1.97 

0.76 

7.11 

3.40 

13.06 

BOO 

78 

%Change 

88:2-89:2 

-3.5 

0.5 

4.9 

12.8 

2.1 

5.8 

1.6 

-3.7 

5.6 

-8.6 

6.0 

2.4 

1.8 

6.3 

4.9 

-1.6 

5.5 

7.6 

2.8 

5.9 

9.9 

5.9 

-1.2 

4.4 

5.7 

0.3 

5.0 

-1.8 

4.8 

6.4 

% Change 

21.9 

30.8 

8.5 

-4.5 

15.3 

7.0 

23.0 

36.3 

13.0 

-51.8 

30.7 

-4.8 

-20.5 

20.6 

3 
Table Ill. First Half Bank Data (Dollar figures in billions, ratios in %) 

Asset Size Distribution Geographic Distribution 

EAST WEST Less $100 Million Greater 

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

All Banks Million $1 Billion Billion Billion Region Region Region Region Region Regio~ 

FIRST HALF Preliminary 

(The way it is ... ) 

Number of banks reporting .......... . ... 12,944 10,081 2,487 336 40 1,094 1,958 2,884 3,064 2,446 1,498 

Total assets . . . . . . . . . . . . . . . . .. . . . . . . . . $3,207.32 $371.76 $588.54 $1,042.66 $1,204.35 $1,275.86 $457.76 $519.79 $207.44 $258.05 $488.42 

Total deposits . ... ...... .. ....... ...... 2,452.86 329.09 503.67 773.54 846.57 913.65 362.54 413.37 164.39 216.41 382.51 

Net income /in millions) ... ... .. .... ..... .. 14,322 1,668 2,808 4,401 5,445 5,515 2,224 2,768 1,150 84 2,580 

Percentage of banks losing money ....... 9.7% 11 .0% 5.3% 5.9% 2.5% 8.8% 9.5% 3.4% 4.6% 21.8% 13.7% 

Percentage of banks with earnings gains .. 64.9% 62.6% 73.1% 72.3% 65.0% 71 .2% 67.1% 68.0% 59.5% 59.0% 72.0% 

Performance Ratios (annualized) 

Yield on earning assets ................. 11 .25% 10.49% 10.79% 11.05% 11.91% 11 .89% 10.80% 10.61% 10.92% 10.15% 11.39% 

Cost of funding earning assets ........... 7.18 5.90 6.15 6.74 8.55 8.28 6.53 6.61 6.43 6.59 6.15 

Net interest margin .................... 4.06 4.59 4.64 4.31 3.36 3.61 4.27 4.00 4.49 3.56 5.24 

Net noninterest expense to earning assets . 2.05 2.75 2.63 2.21 1.36 1.67 2.37 2.03 2.03 2.31 2.63 

Net operating cash flow to assets ........ 1.77 1.68 1.81 1.86 1.70 1.69 1.69 1.76 2.21 1.06 2.25 

Net operating income to assets .......... 0.88 0.88 0.96 0.84 0.89 0.87 0.97 1.08 1.10 0.03 1.00 

Return on assets .... . . . . . . . . . . . . .. . ... 0.91 0.91 0.97 0.86 0.92 0.88 0.99 1.09 1.13 0.07 1.08 

Return on equity ...................... 14.22 10.07 12.98 13.66 17.99 14.61 14.18 15.89 14.68 1.12 17.85 

Net charge-offs to loans and leases .. .. .. . 0.87 0.64 0.62 0.87 1.05 0.90 0.46 0.67 0.93 1.77 0.95 

Loan loss provision to net charge-offs ..... 93.59 123.10 123.09 119.07 6103 74.51 138.57 92.65 117.96 98.29 106.61 

Condition Ratios 

Loss allowance to: 

Loans and leases .......... . ......... 2.27% 1.67% 1.57% 1.73% 3.26% 2.64% 1.32% 1.89% 1.96% 2.56% 2.54% 

Noncurrent loans and leases .. . . ....... 74.19 72.27 75.52 85.75 69.56 68.97 96.28 99.15 94.56 44.66 83.50 

Nonperforming assets to assets . . .. . .. . . 2.25 1.92 1.77 1.58 3.16 2.52 1.12 1.29 1.59 4.75 2.57 

Equity capital ratio . . .... . . . .. . . . . . ... . 6.44 9.08 7.55 6.35 5.16 6.06 7.02 6.R9 7.82 5.84 6.15 

Primary capital ratio ....... . .. ... . .. .... 7.99 9.96 8.53 7.51 7.53 7.90 7.88 8.16 9.02 7.07 8.18 

Net loans and leases to deposits .. .. . . . . . 79.26 59.41 71 .50 86.77 84.73 84.97 78.76 74.34 73.09 59.63 85.15 

Growth Rates (year-to-year) 

Assets ...... . ... .............. ... ... . 4.9% 5.8% 9.5% 11.1% 4.1% 4.6% 9.5% 6.8% 0.8% -4.7% 7. 

Equity capital ......................... 9.9 5.3 9.3 12.0 14.3 11.7 9.7 8.7 4.7 2.8 14.L 

Net interest income ........... . . . ... .. . 9.4 11.9 16.9 15.2 6.6 8.1 10.3 10.1 4.4 -1.2 17.2 

Net income ......... .. ...... .... ... . . . 37.9 22.3 18.8 10.4 1.5 -3.9 9.1 6.8 7.0 N/M 49.5 

Nonperforming assets .... .... ........ .. -1 .2 3.3 16.4 24.6 3.1 13.0 15.3 13.2 -8.6 -27.6 -7.4 

Net charge-offs .................•...... -8.3 1.7 17.9 -7.2 16.2 45.8 -17.6 -3.3 -29.5 -53.6 -6.4 

Loan loss provision .................... -13.3 2.6 17.8 30.5 5.9 12.6 13.3 16.8 -2.7 -63.9 23.4 

PRIOR FIRST HALVES 

(The way it was ... ) 

Return on assets ................. 1988 0.69% 0.72% 0.78% 0.69% 0.64% 0.96% 0.99% 1.09% 1.06% -2.08% 0.77% 

................. 1986 0.68 0.75 0.85 0.75 0.49 0.80 1.10 0.93 0.77 -0.08 0.26 

. .. . ....... ...... 1984 0.63 0.97 0.92 0.73 0.22 0.63 0.99 0.25 0.93 0.82 0.47 

Equity capital ratio .. .... ....... .. 1988 6.15 8.78 7.35 6.20 4.58 5.67 7.01 6.76 7.53 5.41 5.80 

................. 1986 6.33 8.65 7.23 6.16 5.03 5.83 6.80 7.02 7.53 6.92 5.57 

................. 1984 6.07 8.66 7.16 5.82 4.41 5.39 6.79 6.45 7.65 7.01 5.38 

Nonperforming assets to assets .... 1988 2.39 2.07 1.81 1.72 3.36 2.33 1.07 1.21 1.75 6.26 2.99 

................. 1986 2.03 2.37 1.90 1.59 2.33 1.59 1.03 1.52 2.44 3.57 3.16 

... . ...... ..... .. 1984 1.70 0.66 0.84 1.46 2.86 1.70 0.66 1.79 1.10 1.52 2.69 

Net charge-offs to loans and leases . 1988 1.00 0.75 0.74 1.16 1.06 0.65 0.62 0.75 1.40 3.40 1.09 

.. . .............. 1986 0.84 1.16 0.78 0.80 0.81 0.57 0.50 0.60 1.81 1.53 1.12 

... .............. 1984 0.61 0.59 0.48 0.56 0.72 0.33 0.32 1.00 0.69 0.93 0.77 

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. Second Quarter Bank Data (Dollar figures in billions, ratios in %) 

Asset Size Distribution Geographic Distribution 

EAST WEST Less $100 Million Greater 

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

All Banks Million $1 Billion Billion Billion Region Region Region Region Region Region 

DND QUARTER Preliminary 

.'he way it is . . . ) 

Number of banks reporting ....... . .. .. . . 12,944 10,081 2,487 336 40 1,094 1,958 2,884 3,064 2,446 1,498 

Net income ..... . .. . . .. ..... . ... . .... . 7,028 801 1,401 2,036 2,790 2,786 1,132 1,381 541 -34 1,222 

Percentage of banks losing money .. .. . . . 10.4% 11.8% 5.6% 6.3% 5.0% 9.3% 10.3% 3.8% 5.5% 22.4% 14.5% 

Percentage of banks with earnings gains .. 61.9% 59.6% 69.9% 72.3% 62.5% 64.7% 62.1% 65.4% 57.7% 57.6% 68.4% 

Perfonnance Ratios (annualized) 

Yield on earning assets ... .. . . . . .. . .. . . . 11 .49% 10.66% 10.99% 11.29% 12.20% 12.16% 10.95% 10.83% 11 .28% 10.45% 11 .60% 

Cost of funding earning assets ........... 7.45 6.05 6.34 6.98 8.89 8.59 6.71 6.83 6.72 6.93 6.37 

Net interest margin ............. ... .... 4.05 4.60 4.65 4.31 3.31 3.58 4.23 4.01 4.56 3.51 5.23 

Net noninterest expense to earning assets . 2.03 2.74 2.63 2.20 1.33 1.68 2.33 1.95 2.15 2.28 2.57 

Net operating cash flow to assets . . . .... . 1.77 1.69 1.82 1.87 1.69 1.66 1.70 1.84 2.16 1.05 2.28 

Net operating income to assets ... . . ..... 0.85 0.84 0.95 0.77 0.87 0.83 0.97 1.08 1.05 -0.11 0.95 

Return on assets . ..................... 0.89 0.87 0.96 0.79 0.93 0.88 1.00 1.08 1.07 -0.05 1.02 

Return on equity .. ... .. ....... . .. ... . . 13.78 9.58 12.78 12.45 18.20 14.58 14.26 15.64 13.60 -0.91 16.58 

Net charg~ffs to loans and leases .... ... 1.03 0.74 0.68 0.94 1.36 1.19 0.51 0.74 0.92 1.92 1.04 

Loan loss provision to net charg~ffs •.. . . 86.75 118.68 116.96 127.50 48.95 59.54 132.08 93.65 118.08 106.28 113.69 

Growth Rates (year-to-yeary 

Net interest income . . .. .. ... . . . . . ... ... 8.5 10.5 15.0 14.3 5.8 7.0 9.5 9.2 4.6 -2.1 16.0 

Net income .. .. ................... . ... 30.7 20.2 20.5 2.8 2.8 -5.6 13.9 8.8 -1.8 NIM 49.7 

Net charg~ffs . . .............. . ..... .. -4.8 3.2 5.1 -14.7 46.8 102.1 -2.0 9.4 -32.0 -64.2 -20.4 

Loan loss provision . . .. ... . .. . ..... .. . . -4.5 4.6 9.6 31.9 6.5 18.3 3.0 32.3 -9.8 -52.9 30.3 

PRIOR SECOND QUARTERS 

(The way it was . . . ) 

Return on assets .. ............. . .1988 0.71% 0.67% 0.75% 0.67% 0.74% 0.97% 0.96% 1.06% 1.08% -1.79% 0.73% 

. .. .. . .. .. .. . ... .1986 0.60 0.63 0.80 0.80 0.32 0.77 1.09 0.90 0.77 -0.15 -0.04 

. . .. . . ... . . .. .... 1984 0.56 1.00 0.94 0.74 -0.02 0.61 1.04 -0.25 0.94 0.84 0.54 

Net charg~ffs to loans and leases . 1988 1.14 0.89 0.93 1.38 1.10 0.63 0.57 0.73 1.41 4.75 1.40 

..... . ... . . .. . . .. 1986 0.97 1.45 0.94 0.86 0.92 0.64 0.56 0.66 2.06 1.93 1.28 

......... . ....... 1984 0.77 0.69 0.63 0.72 0.93 0.41 0.37 1.48 0.89 0.97 0.94 

NOTES TO USERS 

COMPUTATION METHODOLOGY FOR PERFORMANCE AND CONDITION RATIOS 

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

All asset and liability figures used in calculating perfomnance 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 unifomn composite rating, based upon an evaluation of financial and operational criteria. The rating 

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

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

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

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

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

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

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

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

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

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

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

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

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

previously charged off. 

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. 

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. 

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

remaining maturities of one year or less. 

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

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

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

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