The FDIC 

uarte r 1Y-_______L_.W_i_llia_m_S_e_id_m_an_,_C_ha_ir_m_an 

Third Quarter 1989 anking Profile

FDIC 

Division of Research 

P - -·•tstlcs 

aldrop 

l~ _ ,,18-3951 

COMMERCIAL BANKING PERFORMANCE-THIRD QUARTER 1989 

• Commercial Banks Register Aggregate Quarterly Loss 

• Additions to LDC Reserves Clobber Industry Earnings 

• Asset Growth Is Increasingly Dependent On Real Estate Lending 

• More Banks Showing Profits 

• Number of Problem Banks Continues to Fall 

Commercial banks reported an aggregate loss of $7 44 the quarter, bringing the total for 1989 to 162. The 

million for the third quarter of 1989. The quarterly loss number of banks on the FDIC's "Problem List" 

was the industry's first since the second quarter of declined by 115 during the quarter, to 1,151 . 1987. Just as in 1987, the loss resulted from large 

additions to reserves for loans to developing countries Commercial banks' total third-quarter loss provision 

{LDCs) by several of the nation's largest banks. As a was $12.7 billion, almost three times as much as the 

result of these provisions, the industry's net income of $4.5 billion the industry set aside a year ago. Five of 

$13.7 billion through the first nine months of 1989 is the ten largest banks in the U.S. set aside $6.3 billion 

almost $5 billion less than the amount earned in the in third-quarter loan-loss provisions, mostly to 

first three quarters of 1988. Real estate loan growth in strengthen their reserves against future LDC loan 

the past twelve months has been equivalent to two­ losses. These five money-center banks incurred 

thirds of all bank asset growth during that time. quarterly earnings losses of $5.6 billion. In all, commercial banks set aside $8.5 billion in loss provisions 

The large additions to reserves overshadowed other for foreign operations in the quarter, about half as 

third-quarter developments. Gains from securities much as they set aside in the second quarter of 1987. 

sales of just over $300 million exceeded the total for A year ago, they set aside $1 oo million. Many banks 

all of 1988. Nonperforming assets increased by $3.2 also increased their domestic reserves against future 

billion, but ended the quarter below the level of a year losses on troubled real estate loans. 

ago. As has been the case recently, asset quality 

showed improvement in the three regions west of the Chart B - Composition of Bank Capital By Mississippi River, and slippage in the three eastern Asset Size, June 30- September 30, 1989 

regions, compared with the same quarter a year ago. Pen::ent of Assets ~ Reserves 

12 ~-- - ~ ----~---~ ~---~ 

Sixty-one banks failed or received assistance during ~ Resen,es 

10 

Chart A - Quarterly Net Income of FDIC-Insured 

Commercial Banks, 1985-1989 $ BIiiions 

.................... , ............... · ..... : 73 ......... . . ··························,········· ....................... ......... ' 6.6: . 7.0 ' 

5.8 : 6.4 6.3 5.9 

4.8 4.7 5.0 : 5.1 4.8 : 5.2 

.. 3..S; 4.1 ...~.~: : • 

2.3: 

-.74 

0 l.---li:lilLllli===~=..IOOl.'-'=-GJl-i.:aL.l'°"'l'""'-'""'-"=.t:~""-"l"'4,cff-l 

L]J F"vst Ropubl~Etfect 

iii) ~;;;;;~~~ 6/89 9/89 6/89 9/89 6/89 9/89 6/89 9/89 

LT $100 Mllllon $100 MIiiion $1 to 10 Bllllon GT $10 Blllldn 

to S1 BIiiion -a § ...~~to~-~ .!~ .. 

The banking industry's equity capital fell $2.2 billion 

during the third quarter. Equity of the five money-cen1234 12 3412341234123 ter banks that experienced quarterly losses declined 1985 1986 1987 1988 1989 by $5.1 billion, as their loss reserves increased by $5.7 

I 

-4 

For assistance contact: Section508@fdic.gov
---

5.0 

billion. The rest of the industry had equity growth of remained at a higher level than any other region's. The 

almost $3 billion and reserve growth of $2.1 billion. percentage of Southwest Region banks with quarterly 

earnings losses declined from year-earlier levels for 

Chart C - Quarterly Net Interest Margins, the sixth consecutive period. 1983 -1989 

Net Interest Margin (%) 

..... 

\ ..... V \ 

I\ J \,...V \ 1 11 

4.51% 

_ I'-. --.. 4.5 ' ..... 

\I ~\ V 

V 

Banks< $100 Million 

I\ 

4.0 1/1\V V \ I i- \ 1/ -I"'- / ·--r--..... ....... \V 3.88% 

,_Y\ /Banks> $100 Million 

3.5 I I I I I I I I I 111 

1983 1984 1985 1986 1987 1988 1989 

Net interest margins shrank between June and September as increases in banks' cost of funds outdistanced interest income growth. Margins were still 

slightly wider than in the same period of 1988, thanks 

in part to the small decline in nonperforming assets. 

Noninterest income continued to show double-digit 

growth; noninterest expense, while increasing less 

rapidly, grew at a more rapid rate than did assets. 

Aggregate results in the Northeast Region, home to 

the five money-center banks, were most affected by 

third-quarter LDC reserving. Northeast Region banks 

were the only group other than banks in the Southwest 

to register an aggregate quarterly loss. Their thirdquarter loss provision was $8.9 billion higher than a 

year ago. Over half the Region's banks had lower 

earnings than a year ago, and one in seven Northeast 

banks had a net loss for the quarter. The percentage 

of real estate loans in nonaccrual status was double 

the level of a year ago. 

Southwest Region banks had a net loss for the third 

quarter, but they still showed a small profit for the first 

nine months of 1989. Noninterest income was more 

than fifty percent higher than in the third quarter of 

1988, while noninterest expense growth was kept low. 

Net loan charge-offs fell as a percent of total loans, but 

Chart D - Nonperforming Assets to Assets Ratios 

by Region, 1984-1989 

Assets to Assets ("') 

7 

Banks in the Southeast Region had the strongest 

asset growth of any region, but net interest income 

growth did not keep pace, and net interest margins 

were narrower. Real estate loans accounted for almost half of the region's asset growth in the third 

quarter. Higher loss provisioning hurt Southeast 

banks' profitability. 

Central Region banks recorded a small drop in 

profitability as their third-quarter loss provision was 

almost double last year's. Most of the increase in the 

loss provision went to bolster reserves for LDC loans. 

Midwest banks improved their profitability slightly, 

despite marginal asset growth. Net charge-offs were 

higher, but nonperforming assets were lower, than a 

year ago. Strong noninterest income growth and containment of overhead costs helped earnings. 

Chart E - Composition of Nonperforming Assets 

September 30, 1989 

Noncurrent Real Noncurren1 Commercial and Estate Loans Industrial Loans 

20.8% 

AH Other Noncurrent Loans 

Banks in the West Region benefited from strong loan 

growth, especially real estate and consumer loans. 

Nonperforming assets and net charge-offs were lower 

than a year ago. Depressed real estate markets continue to adversely affect the performance of some 

banks in the West. 

The outlook for fourth-quarter earnings depends on 

developments in depressed or overbuilt real estate 

markets, and on bank decisions regarding their reserves for loans to LDC borrowers. Further losses on 

troubled real estate loans can be expected to depress 

profits, and additional discretionary additions to LDC 

loss reserves are possible. Some of the money-center 

banks that depleted their equity capital in order to build 

loss reserves in the third quarter will begin restoring 

their equity through new stock issues in the fourth 

quarter. Net interest margins may show improvement 

in the fourth quarter, as consumer deposits roll over at 

lower interest rates. Total bank failures and assistance 

transactions will exceed 200 for the year, and are likely 

to end up only slightly below the 221 failures that 

occurred in 1988. 

0 LJ_-+-J........L--'-+--'---'--'-f-L---'--"-+--'--'--'--+--'-J........L-t-~---'-~ 

9/83 1984 1985 1986 1987 1988 9/89 

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

1989' 1988' 1988 1987 1986 

Return on assets ................... .. .. .. 0.58% 0.82% 0.83% 0.12% 0.63% 

Return on equity ...... ....... . .. .. .... . . . . 9.06 13.38 13.37 2.00 9.94 

Equity capital to assets .............. .. ... . 6.33 6.24 6.28 6.04 6.20 

Primary capital ratio ................ ... ... . 7.92 7.93 7.85 7.70 7.22 

Nonperforming assets to assets .......... . .. 2.34 2.45 2.14 2.46 1.94 

Net charge-offs to loans ........... . ........ 0.88 0.93 0.99 0.92 0.98 

Asset growth rate . .. ... . ..... .... ........ . 4.19 5.17 5.68 2.03 7.71 

Net operating income growth .......... .. ... -26.51 N/M 1686.92 -85.27 -20.65 

Percentage of unprofitable banks .. .. ........ 10.66 13.59 14.44 17.66 19.79 

Number of problem banks .................. 1,151 1,429 1,394 1,559 1,457 

Number of failed/assisted banks . .... . ... . ... 162 186 221 201 144 

'Through September 30; ratios annualized where appropriate. N/M-Not meaningful 

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

(dollar figures in millions) 

Preliminary 

3rd Otr 2nd Qtr 

1989 1989 

Number of banks reporting .... .. . ... .......•..................... 12,824 12,944 

Total employees (full-time equivalent) ....... . ............... ....... . 1,527,645 1,541,482 

CONDITION DATA 

Total assets ... .. ............................................. . $3,224,360 $3,207,431 

Real estate loans .. . . ..... ........ . . . ........... .. ......... . 743,459 719,522 

Commercial & industrial loans .... . ........ . ... .. . . ...... .... . 616,892 612,339 

Loans to individuals ....... ..... . . .. .. ............... . ...... . 387,964 379,337 

Farm loans ... .................... .. ................... . .. . 31,795 31,038 

Other loans and leases .......................... . ... .. ..... . 244,492 246,948 

Total loans and leases . ....... .. .......... . ................. . 2,024,602 1,989,185 

LESS: Reserve for losses ... ..... ........... ............ .... . 52,895 45,092 

Net loans and leases ......... .. .............................. . 1,971,707 1,944,093 

Temporary investments ................... .......... . .. ....... . 464,406 478,760 

Securities over 1 year .. ..... ....... . . .. . . ........ ............ . 400,176 394,630 

AlI other assets ................. . ... . . . .. . ... ............... . 388,072 389,948 

Total liabilities and capital ....... . ........ .. .. .... ... ....... .. ... . 3,224,360 3,207,431 

Noninterest-bearing deposits . . ....... . . ..... ... ..... ... . ....... . 441,827 455,761 

Interest-bearing deposits ....... . ........... ....... .... .. .. . . .. . 2,025,288 1,997,100 

Other borrowed funds ... . . ................................... . 424,078 420,861 

Subordinated debt . . ....... .. . . ...... . ....................... . 19,068 17,684 

All other liabilities ........................................... . 109,863 109,536 

Equity capital ... .. .. ..... ..... ........... ..... ... .. .... .. .. . . 204,237 206,489 

Primary capital ..... .......... ...... ... .............. .. ........ . 260,593 255,219 

Nonperforming assets . . .......................... . . .. .......... . 75,294 72,057 

Loan commitments and letters of credit ...... . .................... . 858,842 851,349 

Domestic office assets ......................................... . 2,793,347 2,791,172 

Foreign office assets ......... .. .... .. .......................... . 431,013 416,259 

Domestic office deposits ....... ....... ... . . ...... ... .... .. ..... . . 2,143,684 2,129,550 

Foreign office deposits ...................................... ... . 323,430 323,311 

Earning assets ........... . .... .......... .. .. . ... .............. . 2,836,289 2,817,482 

Volatile liabilities .............................................. . 1,144,780 1,138,841 

Preliminary First Preliminary 

INCOME DATA First Three Three Qtrs 3rd Otr 

Qtrs 1989 1988 %Change 1989 

Total interest income ..... . ............... . $235,656 $197,430 19.4 $80,914 

Total interest expense ................. . .. . 151,755 119,684 26.8 52,005 

Net interest income ............... .... . . 83,001 77,746 7.9 28,009 

Provision for loan losses .................. . 20,600 11,669 76.5 12,715 

Total noninterest income .... .... . ... ..... . . 37,269 33,338 11.8 12,827 

Total noninterest expense ................. . 79,627 74,538 6.8 27,142 

Applicable income taxes ........ . ......... . 8,088 7,385 9.5 2,165 

Net operating income .. .. .............. . . 12,854 17,491 -26.5 -1,186 

Securities gains, net ...................... . 520 516 0.9 307 

Extraordinary gains, net ..... ...... ........ . 313 592 -47.0 134 

Net income ..... . .......... ...... ... .. • 13,688 18,599 -26.4 -744 

Net charge-offs .......................... . 13,072 13,053 0.1 4,81 8 

Net additions to capital stock ........... . .. . 353 1,427 -75.3 42 

Cash dividends on capital stock . ... ........ . 10,010 8,962 11.7 3,371 

1985 

0.70% 

11.31 

6.20 

6.91 

1.87 

0.84 

8.86 

6.30 

17.09 

1,098 

118 

Banks 

3rd Qtr 

1988 

13,241 

1,525,536 

$3,094,814 

657,485 

594,950 

367,579 

31,136 

250,995 

1,002,145 

49,186 

1,852,959 

483,000 

382,870 

375,984 

3,094,814 

450,818 

1,924,417 

403,008 

17,197 

105,208 

193,267 

246,050 

75,798 

819,260 

2,678,541 

416,272 

2,046,873 

328,362 

2,718,829 

1,101,879 

3rd Qtr 

1988 

$69,684 

42,783 

26,001 

4,453 

11,410 

25,406 

2,601 

5,851 

1 

157 

6,009 

4,568 

248 

2,911 

1984 

0.65% 

10.73 

6.15 

6.91 

1.97 

0.76 

7.11 

3.40 

13.06 

800 

78 

%Change 

88:3-89:3 

-3.1 

0.1 

4.2 

13.1 

3.7 

5.2 

2.3 

-2.6 

6.4 

7.5 

6.4 

-3.8 

4.5 

3.2 

4.2 

-2.0 

5.2 

5.0 

10.9 

4.4 

5.7 

5.9 

-0.7 

4.8 

4.3 

3.5 

4.7 

-1.5 

4.3 

3.9 

% Change 

16.1 

23.7 

4.1 

185.5 

12.4 

6.8 

-16.8 

N/M 

N/M 

-14.5 

N/M 

5.5 

-83.0 

15.8 

3 
Table Ill. First Three Quarters 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 

Al l Banks Million $1 Bi ll ion Bi llion Bil lion Region Region Region Region Region Region 

FIRST THREE QUARTERS Preliminary 

(The way it is ... ) 

Number of banks reporting . . . . . . . . .. . ' . . 12,824 9,927 2,526 330 41 1,086 1,959 2,861 3,042 2,381 1,495 

Total assets .. . ....... . ... . . ..... . ... . $3,224.36 $367.86 $604.82 $1,045.26 $1 ,206.41 $1 ,273.98 $466.09 $524.20 $209.03 $255.92 $495.13 

Total deposits . . . .... . .. .. ... . . .. .. ... . 2,467.11 325.38 515.67 772.77 853.30 915.34 366.69 414.86 166.01 215.10 389.12 

Net income (in millions) ......... . ......... 13,688 2,429 4,146 6,415 698 977 3,233 3,980 1,708 150 3,640 

Percentage of banks losing money ....... 10.7% 11 .9% 5.9% 8.2% 24.4% 11.8% 11 .1% 3.7% 4.6% 23.1% 15.2% 

Percentage of banks with earnings gains . . 63.8% 62.0% 70.2% 67.9% 48.8% 64.9% 62.7% 67.4% 60.5% 59.9% 70.0% 

Perfonnance Ratios (annualized) 

Yield on earning assets . .. . . . ...... . .. .. 11 .33% 10.54% 10.83% 11.08% 12.06% 12.06% 10.82% 10.65% 10.96% 10.13% 11.41% 

Cost of funding earning assets .... . .. . . . . 7.29 5.98 6.23 6.78 8.72 8.47 6.61 6.69 6.49 6.58 6.23 

Net interest margin . . . .. .. . . . . . ... . . . . . 4.03 4.56 4.59 4.30 3.34 3.59 4.21 3.96 4.46 3.55 5.18 

Net noninterest expense to earning assets . 2.04 2.73 2.60 2.14 1.43 1.70 2.36 1.96 2.02 2.26 2.58 

Net operating cash flow to assets ........ 1.75 1.67 1.81 1.90 1.62 1.65 1.64 1.79 2.20 1.10 2.25 

Net operating income to assets .. . . . . ... . 0.54 0.87 0.92 0.82 0.03 0.07 0.92 103 1.08 0.02 0.94 

Return on assets . . . .. . .. . . . . . .... . .... 0.58 0.90 0.94 0.84 0.08 0.10 0.95 1.04 1.12 0.08 1.01 

Return on equity .... ... . .. . .. .. . . .. .. . 9.06 9.85 12.48 13.36 1.54 1.75 13.57 15.11 14.44 1.33 16.51 

Net charge-offs to loans and leases ....... 0.88 0.63 0.63 0.91 1.04 0.92 0.50 0.66 1.11 1.51 0.99 

Loan loss provision to net charge-offs ..... 157.58 126.09 128.63 130.02 192.44 212.32 135.06 112.61 98.16 126.37 115.92 

Condition Ratios 

Loss allowance to: 

Loans and leases . .. . . .. . . . . . . .. . . . . 2.61% 1.67% 1.59% 1.81% 4.10% 3.46% 1.34% 1.93% 1.86% 2.77% 2.54% 

Noncurrent loans and leases ........... 83.40 72.63 74.63 81.49 87.56 84.93 87.48 99.59 99.22 49.02 88.28 

Nonperiorming assets to assets .... . ... .. 2.34 1.90 1.77 1.77 3.24 2.76 1.24 1.33 1.46 4.75 2.47 

Equity capital ratio . . . . . . . . . . . . . . . . . . . . . 6.33 9.16 7.61 6.38 4.79 5.70 7.07 6.94 7.76 5.89 6.24 

Primary capital ratio .. . . ..... .... .. . .. .. 7.92 10.05 7.97 7.54 7.57 7.98 7.91 7.50 8.91 7.24 8.17 

Net loans and leases to deposits . .. . ..... 79.92 59.57 71.51 87.89 85.54 85.80 79.39 75.23 72.72 59.04 86.21 

Growth Rates (year-to-year) 

Assets .......... . . . ... . . . . . . . . . . . . . . . 4.2% 6.0% 9.1% 10.1% 2.5% 2.4% 9.9% 6.0% 1.0% -2.4% 6 

Equity capital . . . . . . . .. . ... . . . . . .. . . . . . 5.7 5.0 9.4 12.1 2.5 1.7 9.5 7.8 2.8 0.9 13.• . 

Net interest income . ........ ....... . ... 7.9 9.7 13.8 13.0 6.9 6.7 7.8 8.1 3.2 1.9 14.6 

Net income ....... .. .. . .... ..... . .. ... -26.4 18.0 11 .0 4.8 -91.1 -88.8 3.8 2.5 6.3 109.7 29.4 

Nonperforming assets .... . ... .... .. . ... -0.7 3.5 17.3 35.4 -12.1 18.6 26.7 13.6 -12.0 -34.2 -9.8 

Net charge-offs . . .. . ....... . . . .. ...... . 0.1 -0.4 10.8 5.0 6.8 35.2 -5.4 2.8 -9.5 -42.5 -7.0 

Loan loss provision .. . . . . . .... .. . ... ... 76.5 4.0 22.7 47.9 250.1 236.4 18.9 42.2 -1 .7 -28.0 33.7 

PRIOR FIRST THREE QUARTERS 

(The way it was . .. ) 

Return on assets ....... . .. . . ..... 1988 0.82% 0.74% 0.78% 0.78% 0.91% 0.96% 1.01% 1.08% 1.06% -0.80% 0.84% 

................. 1986 0.68 0.67 0.78 0.80 0.53 0.80 1.09 0.93 0.77 -0.13 0.33 

.. . . ... . .. . ... ... 1984 0.67 0.98 0.94 0.77 0.30 0.67 1.04 0.42 0.90 0.79 0.51 

Equity capital ratio .. .. . ...... .. .. 1988 6.24 8.92 7.33 6.23 4.81 5.74 7.10 6.83 7.63 5.70 5.88 

................. 1986 6.40 8.70 7.25 6.21 5.15 5.95 6.86 7.09 7.67 6.84 5.61 

......... . . . .... .1984 6.26 8.83 7.25 5.87 4.76 5.57 6.97 6.82 7.74 7.11 5.51 

Nonperforming assets to assets .... 1988 2.45 2.06 1.84 1.59 3.64 2.38 1.08 1.24 1.68 7.05 2.92 

... . ............. 1986 2.09 2.42 1.98 1.68 2.36 1.62 1.06 1.52 2.38 4.07 3.13 

... .... . ... ... . . . 1984 1.65 0.69 0.87 1.49 2.68 1.71 0.71 1.33 1.12 1.60 2.70 

Net charge-offs to loans and leases . 1988 0.93 0.75 0.75 1.02 0.99 0.72 0.58 0.69 1.30 2.39 1.16 

. .. . ......... . ... 1986 0.90 1.25 0.88 0.85 0.81 0.58 0.52 0.60 2.03 1.72 1.20 

... ......... . .. .. 1984 0.67 0.64 0.52 0.59 0.82 0.34 0.35 1.22 0.81 0.97 0.80 

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 Carol ina, 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. Third Quarter 1989 Bank Data (Dollar figures in billions, ratios in %) 

Asset Size Distribution Geographic Distribution 

Less $100 Million Greater EAST WEST 

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

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

IRD QUARTER Preliminary 

, The way it is . .. ) 

Number of banks reporting .. . .. . ... ..... 12,824 9,927 2,526 330 41 1,086 1,959 2,861 3,042 2,381 1,495 

Net income . ...... . .... . .... .. . . .... .. -744 778 1,219 2,083 -4,824 -4,500 1,029 1,236 560 -129 1,059 

Percentage of banks losing money ..... .. 11 .5% 12.8% 6.6% 8.5% 31.7% 13.6% 12.7% 4.6% 6.3% 21 .8% 15.8% 

Percentage of banks with earnings gains .. 54.8% 53.7% 58.8% 61 .5% 36.6% 49.1% 52.3% 58.8% 53.3% 54.7% 58.1% 

Performance Ratios (annualized) 

Yield on earning assets . . .. . . . .. ... .... . 11.47% 10.68% 10.94% 11 .15% 12.29% 12.36% 10.87% 10.71 % 11.00% 10.24% 11 .41% 

Cost of funding earning assets .... ... ... . 7.50 6.18 6.41 6.90 9.04 8.80 6.76 6.82 6.60 6.72 6.;35 

Net interest margin . .... ... ... . . . .... . . 3.97 4.51 4.53 4.26 3.25 3.56 4.10 3.89 4.40 3.51 5.06 

Net noninterest expense to earning assets . 2.03 2.68 2.58 2.03 1.54 1.77 2.35 1.83 2.00 2.35 2.47 

Net operating cash flow to assets . .. ..... 1.71 1.66 1.77 1.98 1.46 1.57 1.57 1.84 2.16 0.99 2.24 

Net operating income to assets ..... ..... -0.15 0.81 0.80 0.77 -1 .69 -1.49 0.84 0.94 1.03 -0.30 0.82 

Return on assets ............... . .. . . .. -0.09 0.85 0.82 0.80 -1.59 -1.42 0.89 0.95 1.08 -0.20 0.86 

Return on equity .. . ... . .. . . ... . .. .... . -1 .45 9.30 10.73 12.66 -32.01 -24.08 12.65 13.73 13.83 -3.44 13.91 

Net charge-offs to loans and leases . .... .. 0.96 0.71 0.74 1.04 1.06 0.98 0.57 0.64 1.47 1.72 1.07 

Loan loss provision to net charge-offs ..... 263.89 124.00 129.11 138.76 445.07 459.31 124.62 153.40 74.03 145.38 131 .57 

Growth Rates (year-to-year) 

Net interest income . . . . ....... . ...... . . 4.1 4.4 7.1 8.5 4.3 4.9 2.5 5.1 0.4 -5.0 8.4 

Net income .. . ....... . .. . . ... . ..... ... NIM 7.1 -6.0 -3.3 NIM N/M -5.4 -4.8 4.1 N/M -3.0 

Net charge-offs .................. .... .. 5.5 4.8 10.4 36.3 -3.8 19.7 23.3 19.0 38.3 -33.0 -8.4 

Loan loss provision .... . .... . . . .. .... . . 185.5 8.7 27.7 67.0 755.7 687.0 25.0 94.8 0.5 -39.7 49.6 

PRIOR THIRD QUARTERS 

(The way it was ... ) 

Return on assets ... ... ........... 1988 0.78% 0.73% 0.70% 0.68% 0.94% 0.97% 1.04% 1.06% 1.05% -1 .53% 0.96% 

....... . .. . ... . .. 1986 0.69 0.50 0.64 0.89 0.61 0.79 1.08 0.94 0.74 -0.25 0.46 

. . ... . .. . .. ... . .. 1984 0.75 0.97 0.96 0.85 0.43 0.73 1.09 0.75 0.81 0.70 0.57 

Net charge-offs to loans and leases . 1988 0.97 0.83 0.86 0.90 1.12 0.87 0.52 0.58 1.11 2.32 1.28 

.. . . . .. . .. ... . .. .1986 1.01 1.43 1.11 0.97 0.84 0.59 0.58 0.61 2.48 2.17 1.32 

... . . . ....... . .. .1984 0.79 0.76 0.59 0.64 1.00 0.37 0.42 1.64 1.04 1.07 0.83 

5 
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Federal Deposit Insurance Corporation 

Washington, DC 20429 

OFFICIAL BUSINESS 

Penalty for Private Use, $300 

Postage & 

Fees Paid 

FDIC 

Permit No. G36 

NOTES TO USERS 

COMPUTATION METHODOLOGY FOR PERFORMANCE AND CONDITION RATIOS 

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

All asset and liability figures used in calculating performance ratios represent average amounts for the period (beginning-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 concem. "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 Nonlnterest 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 nonrecuning 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 nonrecuning 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. 

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

Noncurrent Loans & Leases-the sum of loans past-due 90 days or more and loans in nonaccrual status. 

Primary Capital-total equity capital plus the allowance for loan and lease losses plus minority interests in consolidated subsidiaries plus qualifying mandatory convertible debt 

(cannot exceed 20 percent of total primary capital), less intangible assets except purchased mortgage servicing rights. 

Net Loans and Leases-total loans and leases less unearned income and the allowance for loan and lease losses. 

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

with remaining maturities of one year or less. 

Volatile Llabilltles-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.