Fourth Quarter 1996 COMMERCIAL BANKING PERFORMANCE — FOURTH QUARTER 1996 

• Banks Earn $13.7 Billion In Fourth Quarter 

• Full-year Earnings Of $52.4 Billion Set A New Record 

• Growth In Net Interest Income And Fee Income Boosts Profits 

• Asset Quality Continues To Improve, Except In Consumer Lending 

FDIC 

Division of Research 

& Statistics 

Don Inscoe 

Associate Director, 

Statistics Branch 

(202) 898-3940 

Tim Critchfield 

(202) 898-8557 

Jim McFadyen 

(202) 898-7027 

Ross Waldrop 

(202) 898-3951 

Insured commercial banks reported net income 

of $13.7 billion in the fourth quarter of 1996. This 

was the third-highest quarterly earnings total 

ever reported, $42 million less than banks 

earned in the second quarter of 1996, and only 

$91 million below the all-time quarterly high of 

$13.8 billion, which was set in the third quarter of 

1995. Industry earnings were $584 million higher 

than in the third quarter of 1996, and were $1.7 

billion (14.5 percent) above the level of a year 

ago. Higher net interest income and increased 

fee income were the main sources of improvement, while rising loan-loss provisions limited the 

increase in earnings. For the full year, banks 

earned $52.4 billion, an increase of $3.6 billion 

(7.5 percent) over 1995. The return on average 

assets (ROA) in the fourth quarter was 1.21 percent, up from 1.19 percent in the third quarter and 

1.12 percent a year earlier. Commercial banks' 

full-year ROA rose to 1.19 percent, from 1.17 

Quarterly Net Income, 1992 - 1996 

$ Billions 

15 

Securities and Other Gains, Net 13.8 13.8 13.7 13.2 Net Operating Income 11.8 12.0 12.0 12.0 11.5 10.711.1 10.811.111.2 10.8 10.3 

10 

8.5 7.9 7.7 7.5 

5 

0 

1 2 3 4 1 2 34 1 2 34 1 2 34 12 3 4 

1992 1993 1994 1995 1996 

percent in 1995. This is the second-highest annual ROA ever reported by the industry, after the 

1.20 percent registered in 1993. Almost 60 percent of all banks reported higher quarterly earnings than a year ago, and almost three-quarters 

(71.2 percent) reported higher full-year earnings. 

More than two-thirds of all banks (69.0 percent) 

reported full-year ROAs of one percent or higher. 

The largest contribution to the record level of 

earnings in the fourth quarter came from noninterest income, which was $2.9 billion (13.3 percent) higher than in the fourth quarter of 1995. 

Net interest income was up by $2.4 billion (6.0 

percent), due to wider net interest margins and a 

5.7-percent increase in interest-earning assets. 

These improvements outweighed a $637-million 

increase in loan-loss provisions, and a $2.3-

billion increase in noninterest expenses. Most of 

the improvement in net interest margins occurred 

at larger banks, as their average funding costs 

Quarterly Net Interest Margins, 1992 - 1996 

Net Interest Margin (%) 

5 

4.5 

4 

123 

1992 

Assets < $100 Million 4.74% 

Assets > $100 Million 4.28% 

41234123412341234 

1993 1994 1995 1996 

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

Information Center, 801 17th Street, NW, Washington, DC 20434; telephone (202) 416-6940. 

Also available on the Internet at www.fdic.gov. Comparable financial data for individual institutions can now be obtained from 

the FDIC's Institution Directory (I.D.) System on this Web site. 
declined more rapidly than their average asset yields. 

The increase in the industry's net interest margin in the 

fourth quarter compared to a year ago marked the first 

time since the first quarter of 1995 that margins have 

widened over year-earlier levels. For the full year, the industry's net interest margin averaged 4.27 percent, 

down slightly from 4.29 percent in 1995. Margins have 

narrowed in each of the past three years, from a peak of 

4.40 percent in 1993. 

For the second consecutive year, the industry's growth 

rate slowed. Total assets of commercial banks increased by 6.2 percent ($266 billion) in 1996, a lower 

rate of growth than in 1995 or 1994, when asset growth 

rates were 7.5 percent and 8.2 percent, respectively. 

Banks continued to increase the share of loans in their 

asset portfolios. At the end of 1996, net loans and 

leases accounted for 60.2 percent of all commercial 

bank assets, up from 59.1 percent at the end of 1995. 

This is the highest level since the end of the first quarter 

of 1991. The largest increases were in commercial and 

industrial loans, which increased by $48.5 billion, in 

loans secured by 1-4 family residential properties, 

which increased by $30.4 billion, and loans to depository institutions, which rose by $27.2 billion. Large percentage increases also were registered in loans for real 

estate construction (up 11.2 percent) and leases (up 

36.3 percent). As banks increased their loans, they reduced their holdings of U.S. Treasury securities by 

$28.9 billion (14.6 percent) in 1996. 

Noncurrent Loan Rates* at Year-End, 1984 - 1996 

% of Loans 

6.0 

5.0 

4.0 

3.0 

2.0 

1.0 

0.0 

* Noncurrent loan rates represent the percentage of loans that are past due 90 days or 

more or in nonaccrual status. 

** Includes loans to foreign governments, depository institutions and lease receivables. 

Asset quality indicators were mixed, as noncurrent 

loans declined during 1996, while delinquent loans — 

those with scheduled interest payments 30 to 89 days 

past due — increased by 15.1 percent. Net loan chargeoffs were $3.3 billion higher than in 1995, due to higher 

charge-offs on consumer loans. Net charge-offs of 

credit-card loans totaled $9.5 billion in 1996, accounting 

for 61.1 percent of all loan charge-offs. This was an inReal Estate 

Loans to Individuals 

C&I 

All Other Loans** 

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 

crease of $2.7 billion from the $6.8 billion in credit-card 

loans that banks charged off in 1995. Charge-offs on 

other loans to individuals rose to $2.9 billion, an increase of $871 million over 1995. 

Annual Net Loan Charge-Off Rates, 1984 - 1996 

% of Loans 

3.0 

2.0 

1.0 

0.0 

Real Estate 

Loans to 

Individuals 

C&I 

All Other Loans* 

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 

* Includes loans to foreign governments, depository institutions and lease receivables. 

The increase in net charge-offs helped produce an 

$874-million net decline in noncurrent loans (loans 90 

days or more past due and loans in nonaccrual status) 

in 1996. Noncurrent commercial and industrial loans 

declined by $877 million, while noncurrent real estate 

loans fell by $1.0 billion. In contrast to the improvement 

in most loan categories, noncurrent consumer loans increased by $1.1 billion, and noncurrent agricultural 

loans increased by $78 million. While total noncurrent 

loans declined in 1996, the amount of loans with scheduled payments 30-89 days past due rose by $5.1 billion 

15.1 percent. The increase in these delinquent loans 

was greatest in consumer loans, although increases occurred in all of the major loan categories. Credit-card 

loans 30-89 days past due rose by $1.2 billion (24.0 percent) in 1996, while the amount of other loans to individuals that was past due increased by $1.0 billion (15.0 

percent). Past due commercial and industrial loans 

grew by $1.1 billion (20.0 percent), and past due real estate loans increased by $1.4 billion (9.4 percent). 

The industry's reserve coverage ratio rose to a new record level of $1.82 in reserves for each dollar of noncurrent loans, due primarily to the decline in noncurrent 

loans. Total reserves at commercial banks declined by 

$61 million in the fourth quarter, and increased by only 

$781 million (1.5 percent) during 1996. The industry's 

ratio of reserves to total loans fell for the fifteenth consecutive quarter, to 1.91 percent. This is the lowest level 

for this ratio since the first quarter of 1987. 

Total equity capital of commercial banks increased by 

$25.7 billion (7.4 percent) in 1996, to 8.20 percent of total assets at year-end. Retained earnings contributed 

FDIC Quarterly Banking Profile 

FDIC-Insured Commercial Banks 2 Fourth Quarter 1996 
$13.6 billion, as banks paid out almost three-quarters 

(74.0 percent) of their earnings in dividends to stockholders. Atotal of 919 banks paid out $5.6 billion more in 

dividends than they earned in 1996. In 1995, 943 banks 

paid $3.7 billion more in dividends than they earned; in 

1994, 923 banks converted $3.2 billion of equity into 

dividends. A large part of the proceeds from the conversion of equity into dividends in 1996 was earmarked for 

stock repurchases by parent holding companies. 

The number of insured commercial banks declined by 

only 58 institutions in the fourth quarter. This is the 

smallest quarterly decline in the number of banks since 

the third quarter of 1986, when there was a net decline 

of three institutions. Aslowdown in merger activity, combined with a continuing rise in the number of new banks 

being chartered, accounted for the small net reduction 

in the number of banks. There were 102 banks absorbed by mergers during the fourth quarter, while 41 

new banks were chartered. For the full year, the industry 

had a net decline of 412 institutions. There were 554 

banks absorbed by mergers in 1996, and 146 new 

banks were chartered. In 1995, mergers absorbed 606 

banks, and 103 new banks were chartered. Only five 

banks failed in 1996, with no failures occurring in the 

Changes in the Number of FDIC-Insured 

Commercial Banks, 1980 - 1996 

700 

600 

500 

400 

300 

200 

100 

0 

fourth quarter. The number of commercial banks on the 

FDIC's “Problem List” declined from 89 institutions with 

assets of $6.8 billion to 82 institutions with $5.1 billion in 

assets during the fourth quarter. For all of 1996, the 

commercial bank “Problem List” had a net decline of 62 

institutions and $11.7 billion in assets. 

New Charters 

Failed Banks 

Mergers 

5 

146 

554 

`80 `82 `84 `86 `88 `90 `92 `94 `96 

Noncurrent Loan Rates* 

December 31, 1996 

* Noncurrent loan rates represent the percentage of loans that

are past due 90 days or more or in nonaccrual status.

Central Northeast 

West Midwest 

Southeast 

Southwest 

Alabama

0.6

Alaska

1.1

Arizona

1.0

Arkansas

0.9

California

1.1

Colorado

0.6

CT: 1.8

DE: 2.0

DC: 1.0

FL

0.9

Georgia

1.0

Hawaii

1.8

Idaho

0.6

Illinois

0.8

IN

0.7

Iowa

0.7

Kansas

1.1

Kentucky

0.7

LA

1.0

Maine

1.4

MD: 1.0

MA: 1.0

Michigan

0.7

Minnesota

0.7

MS

0.7

Missouri

0.8

Montana

0.9

Nebraska

Nevada 1.0

1.6

NH: 1.6

NJ: 1.3

New

Mexico

1.0

NY

1.3

N. Carolina

0.5

North

Dakota

1.0

Ohio

0.9

Oklahoma

1.4

Oregon

0.6

Pennsylvania

1.0

RI: 0.9

S. Carolina

0.7

South

Dakota

1.7

Tennessee

2.1

Texas

0.9

Utah

1.0

VT

1.2

Virginia

1.1

Washington

0.8

WV

0.9

Wisconsin

0.8

Wyoming

0.7

Puerto

Rico

2.1

Between .75% and 1.5%

Greater than 1.5%

Less than .75%

FDIC Quarterly Banking Profile 

Fourth Quarter 1996 3 FDIC-Insured Commercial Banks 
SAVINGS INSTITUTION PERFORMANCE — FOURTH QUARTER, 1996 

• Savings Institutions Earned $2.2 Billion In The Fourth Quarter 

• Net Interest Margins Held Steady 

• Mergers With Commercial Banks Remove Over $16 Billion In Assets From 

Industry 

Savings institutions rebounded from a net loss in the 

third quarter, earning $2.2 billion in the fourth quarter 

for an average annualized return on assets (ROA) of 

0.85 percent. A special assessment on SAIF deposits 

and extraordinary losses led to a loss of $56 million in 

the previous quarter. Apart from these one-time 

charges, earnings in the fourth quarter were approximately even with the third quarter and were $375 million (21 percent) higher than a year ago. Thrifts 

reported $1.8 billion in profits in the fourth quarter of 

1995, for an average annualized ROA of 0.71 percent. 

Compared to a year ago, net interest income was $366 

million higher in the fourth quarter. Noninterest income also showed strong improvement and was up by 

$422 million (27 percent) over the fourth quarter of 

1995. Loan-loss provisions increased by $202 million 

over the fourth quarter of the previous year. More than 

seven percent of all savings institutions reported 

losses for the fourth quarter, down from over eight percent in the fourth quarter of 1995. More than two-thirds 

(68 percent) reported higher quarterly earnings than a 

year ago. 

Quarterly Net Income, 1992 - 1996 

$ Billions 

4 

3 

2 

1 

0 

-1 

1992 1993 1994 1995 1996 

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

1.7 

1.5 1.6 1.5 

2.4 

1.7 

1.2 

1.6 

1.3 

1.8 

1.9 

1.6 1.7 1.9 

2.2 

1.8 

2.5 2.6 

-0.1 

2.2 

Net Operating Income 

Securities and Other Gains, Net 

Net interest margins showed little change during the 

quarter, rising to 3.24 percent from 3.22 percent in the 

third quarter. The yield on earning assets rose slightly, 

up by two basis points. The cost of funding earning assets was unchanged at 4.52 percent. Net interest margins improved or held steady in all regions and in all 

size groups. For the full year, the industry’s net 

interest margin was up 13 basis points to 3.22 percent, 

primarily because of an 11 basis-point drop in the cost 

of funding earning assets. Much of the thrift industry’s 

health this year can be attributed to lower average 

funding costs. 

Quarterly Net Interest Margins 

1992 - 1996 

Net Interest Margin (%) 

4 

3.5 

3 

12341234123412341234 

Assets < $100 Million 

Assets > $100 Million 

3.58% 

3.23% 

1992 1993 1994 1995 1996 

Thrifts reported just over $7 billion in earnings for all of 

1996, for an annual ROA of 0.70 percent. This was 

$611 million less than the record earnings of $7.6 

billion in 1995, when the industry's ROA was 0.77 

percent. Due in large part to the special assessment 

on SAIF deposits, noninterest expenses rose by $3.9 

billion in 1996. The special assessment on SAIF 

deposits accounted for $3.5 billion of the rise in 

noninterest expense, for an after-tax impact of roughly 

$2.2 billion. Provisions for loan losses were up by 

$385 million (18 percent) in 1996, while net chargeoffs were approximately the same as in 1995. In 1996 

the industry benefited from improved interest margins, 

rising noninterest income, and increased gains on the 

sales of securities. Net interest income rose by over 

$1.6 billion. The sale of securities in 1996 produced 

gains of $901 million, almost double the $463 million 

reported in 1995. Noninterest income rose by $388 

million over levels in 1995. Without the special SAIF 

assessment, the thrift industry would have reported 

record earnings in 1996. 

FDIC Quarterly Banking Profile 

FDIC-Insured Savings Institutions 8 Fourth Quarter 1996 
 

 

Annual Return on Assets, 1947 - 1996 

ROA% 

1 

0.5 

0 

-0.5 

'50 '55 '60 '65 '70 '75 '80 '85 '90 '96 

Higher provisions during the fourth quarter helped 

boost reserves for loan losses. Industry reserves increased by $135 million during the fourth quarter, even 

as noncurrent loans declined by $264 million. As a result, the coverage ratio — loan-loss reserves to noncurrent loans — improved to 78 cents in reserves for 

each dollar of noncurrent loans, up from 73 cents last 

quarter. The coverage ratio now stands at virtually the 

same level registered at the beginning of the year. 

Provisions exceeded net charge-offs in every quarter 

of 1996. The fourth quarter rise in provisions, combined with slower loan growth, caused reserves as a 

percentage of loans to increase after declining for nine 

of the past ten quarters. Reserves rose to 1.09 percent 

of total loans from 1.07 percent at the end of the third 

quarter. 

Coverage Ratio* and Reserve Levels, 1992 - 1996 

$ Billions Coverage Ratio (%) 

30 

Loan Reserves $) 

Noncurrent Loans ($) 

Coverage Ratio (%) 

100 

25 

80 

20 

60 

15 

40 

10 

5 20 

1 2 3 4 1 2 3 412 3 4 1 2 3 4 1 234 

1992 1993 1994 1995 1996 

*Loan-Loss reserves to Noncurrent Loans and Leases. 

Noncurrent loans improved in every category except 

loans to individuals. The noncurrent rate for loans to 

individuals rose from 1.02 percent at the end of the 

FDIC Quarterly Banking Profile 

third quarter to 1.10 percent at year-end. Total loans to 

individuals declined by $186 million during the quarter, 

after rising steadily since the beginning of 1995. The 

reversal of this trend may be temporary, however, 

since recent changes in asset restrictions removed 

limits on the amount of credit-card loans that thrifts 

may hold and still be considered a “qualified thrift 

lender”. Credit-card loans currently make up 23 percent of thrifts’ loans to individuals. Commercial and industrial loans increased during the fourth quarter by 

$346 million. The noncurrent rate on these loans declined to 1.65 percent. Traditionally thrifts have specialized in real estate loans, which also increased this 

quarter, by $285 million. Noncurrent real estate loan 

rates declined to 1.28 percent from 1.32 percent at the 

end of the third quarter. All categories of real estate 

loans showed improvement. 

Noncurrent Loan Rates* at Year-End, 1990 - 1996 

% of Loans 

8.0 

6.0 

4.0 

2.0 

0.0 

1990 1991 1992 1993 1994 1995 1996 

Real Estate 

Loans to Individuals 

C&I 

* Noncurrent loan rates represent the percentage of loans that are past due 90 days or 

more or in nonaccrual status. 

Loan losses in 1996 were just two percent lower than 

in 1995. The net charge-off rate on total loans in 1995 

and 1996 was approximately one-third of one percent. 

The industry has enjoyed a significant improvement in 

loan quality from 1993 when the annual loan-loss rate 

was twice the current level. Both real estate loans and 

commercial and industrial loans showed improvements, as their net charge-off rates fell to 0.23 percent 

and 0.37 percent, respectively. Loans to individuals 

did not fare as well. Net charge-offs on loans to individuals rose sharply, from 1.17 percent of total outstanding loans in 1995 to 1.61 percent in 1996. 

Improvements in other loan categories offset this deterioration. 

Thrift industry assets declined by $7 billion during the 

fourth quarter. A drop of nearly $10 billion in securities 

occurred in the fourth quarter. Almost two-thirds of 

savings institutions reported declines in securities. 

Securities are down by $26 billion or nine percent from 

Fourth Quarter 1996 9 FDIC-Insured Savings Institutions 
Annual Net Charge-Off Rates on Loans, 1990 - 1996 

a year ago, while loans grew by five percent over the 

same period. Securities classified as available-forsale accounted for $19 billion of the decline. This category of securities has declined 12 percent during the 

past year. The balance of securities classified as heldto-maturity remained fairly steady and now each category accounts for about half of all securities. Thrifts 

shed less in deposits than other borrowings during the 

fourth quarter. Deposits were down by $2.1 billion, 

while nondeposit borrowings declined by $2.8 billion. 

Equity capital rose by $823 million during the fourth 

quarter, ending the year at 8.35 percent of assets. At 

the end of 1995, the equity capital ratio was 8.39 

percent of assets. Dividends were $1.7 billion higher 

(42 percent) in 1996 than in the previous year. With 

lower profits in 1996, the $1.2 billion in earnings 

retained by the industry was about one-third of the 

amount retained in 1995. Just two thrifts failed to meet 

minimum capital standards while all remaining 

institutions qualify as either adequately capitalized or 

well-capitalized. 

The number of savings institutions declined by 38 

during the fourth quarter to 1,924 institutions. The 

commercial banking industry absorbed 27 savings 

institutions with $16.4 billion in assets during the 

quarter and four thrifts, with $723 million in assets, 

converted to commercial bank charters. A recent 

change in tax laws made conversions to commercial 

bank charters much less expensive for thrifts that 

carry bad-debt reserves for tax purposes. Industry 

consolidation absorbed 12 thrifts with $12.3 billion in 

assets. There were 17 mutual-to-stock conversions 

during the fourth quarter involving $2.9 billion in 

assets. The number of “problem” institutions declined 

by one to 35 at the end of the fourth quarter. Assets of 

“problem” institutions fell from $8.3 billion to just over 

$7 billion. 

Noncurrent Loan Rates By State* 

December 31, 1996 

Alabama

1.0

Alaska

0.2

Arizona

0.3

Arkansas

0.7

California

1.5

Colorado

0.2

FL

1.0

Georgia

0.9

Hawaii

1.9

Idaho

0.5

Illinois

1.1

IN

0.9

Iowa

0.9

Kansas

0.3 Kentucky

0.8

LA

0.4

Michigan

0.7

Minnesota

0.6

MS

1.6

Missouri

0.9

Montana

0.2

Nebraska

0.7

Nevada

1.7

New Mexico

0.7

N. Carolina

0.7

North

Dakota

0.9

Ohio

0.7

Oklahoma

1.3

Oregon

0.5

S. Carolina

0.7

South

Dakota

0.7

Tennessee

0.5

Texas

1.5

Utah

1.3

CT: 1.8

DE: 1.5

DC: 2.9

Maine

1.1

MD: 1.9

MA: 1.0

NH: 1.1

NJ: 3.5

NY

1.8

Pennsylvania

1.0

RI: 0.9

VT

1.2

Virginia

1.2

Washington

0.6

WV

1.2

Wisconsin

0.4

Wyoming

0.7

Puerto

Rico

1.7

* Noncurrent loan rates represent the percentage of loans that

are past due 90 days or more or in nonaccrual status.

Between .75% and 1.5%

Less than .75%

Greater than 1.5%

Northeast 

Southeast 

Central 

Southwest 

West Midwest 

FDIC Quarterly Banking Profile 

FDIC-Insured Savings Institutions 10 Fourth Quarter 1996 
ALL FDIC-INSURED INSTITUTIONS 

• No Insured Institutions Fail In The Fourth Quarter 

• BIF-Insured Deposits Exceed $2 Trillion For The First Time 

• Reserve Ratios For Both Funds Edge Upward 

Total deposits of the 11,452 FDIC-insured depository institutions rose $99 billion from September 30 to December 31. This included increases of $76.5 billion at 

domestic offices and $22.5 billion at foreign offices. Deposit growth at domestic offices primarily was in large, 

uninsured deposits, as insured deposits increased just 

$21 billion. Domestic deposits increased at a somewhat 

slower rate during the fourth quarter of 1996 — 2.3 percent —than during the fourth quarter of 1995 — 2.8 percent. The growth in deposits occurred primarily in Bank 

Insurance Fund (BIF) members: the BIF assessment 

base grew by $76.7 billion to $2.642 trillion, and the Savings Association Insurance Fund (SAIF) assessment 

base declined $3.3 billion to $708.7 billion.1 

Deposits comprised 77.9 percent of BIF members' domestic liabilities on December 31, which is unchanged 

from year-end 1995. For SAIF members, this ratio declined from 78.0 percent to 75.8 percent during 1996, although an increase from 75.1 percent during the fourth 

quarter of 1996 may reflect the lowering of SAIF premiums that was phased in beginning October 1. As a result of the Deposit Insurance Funds Act of 1996 (Funds 

Act), average SAIF premiums fell from 23.4 cents per 

$100 of assessable deposits in the third quarter of 1996 

to 11.3 cents in the fourth quarter, and to 0.6 cents for 

the first quarter of 1997. Average BIF premiums during 

these periods were approximately 0.2 cents per $100 of 

assessable deposits. 

No insured institution failed during the fourth quarter. 

For the full year 1996, there were six failures, including 

five BIF members, with total assets of $186 million, and 

one SAIF member, with assets of $34 million. This is the 

lowest number of bank and savings institution failures 

since 1972, when five institutions failed (two insured by 

FDIC and three by FSLIC). 

BIF-insured deposits surpassed the $2 trillion mark for 

the first time, having first reached $1 trillion in 1982. 

SAIF-insured deposits fell by nearly $5 billion from September 30, to $683 billion on December 31. The currently favorable operating environment for banks and 

thrifts has resulted in a period of low insurance losses. 

Despite reduced premium revenue, the funds' investment earnings drove fund growth that outstripped 

insured-deposit growth for both the BIF and the SAIF. 

As a result — and based on as yet unaudited fund bal1 The assessment base is composed of total domestic deposits, less a 

“float” adjustment for deposits in transaction accounts. 

FDIC Quarterly Banking Profile 

ances — the BIF reserve ratio increased from 1.32 percent of insured deposits on September 30 to 1.34 percent on December 31, and the SAIF reserve ratio rose 

from 1.27 percent to 1.30 percent. The target reserve ratio remains 1.25 percent, but the Funds Act substantially 

restricts the refunding of “excess” fund balances. 

“Oakar” deposits. A member of one insurance fund 

can acquire deposits insured by the other fund, but this 

portion of the buyer's deposits remains insured by — 

and assessable by — the other fund. At year-end 1996, 

BIF members held $217.3 billion in SAIF-assessable 

deposits, down slightly from September 30; and SAIF 

members held $22.6 billion in BIF-assessable deposits, 

up from $21.3 billion. The significance of the Oakar distinction was diminished by the Funds Act, which enabled the FDIC to set equivalent risk-based premium 

schedules for BIF and SAIF members. A relatively small 

rate differential between BIF- and SAIF-assessable deposits still exists for the FICO assessment (see below). 

“Sasser” institutions. Savings associations can 

convert their charter to that of a commercial or savings 

bank. Converted associations remain members of the 

SAIF, but they become subject to supervision by one of 

the three federal banking agencies. On December 31, 

there were 323 Sasser banks, with $57.4 billion in SAIFassessable deposits. Legislation enacted in 1996 

greatly reduced the tax liability for savings associations 

that become banks, and some increase in conversions 

is to be expected as thrifts seek to diversify their income 

sources. There were 13 conversions in the fourth quarter, nine of which became state-chartered savings 

banks and four of which became commercial banks. In 

addition, a SAIF-member national bank was opened. 

FICO bonds. The Financing Corporation (FICO) was 

created in the 1980s to cover losses incurred by the 

former Federal Savings and Loan Insurance Corporation. FICO sold $8.2 billion in 30-year bonds, with annual 

coupon payments of $793 million. This interest had 

been paid only by SAIF-member savings associations, 

but the Funds Act made all FDIC-insured institutions responsible for a portion of the obligation. For the first 

quarter of 1997, the FICO rate for SAIF-assessable deposits was 6.5 cents per $100, and the rate for BIFassessable deposits was 1.3 cents, or one-fifth the SAIF 

rate, as set by the statute. Beginning in 2000, or sooner 

if the two insurance funds have been merged, all institutions will pay a pro rata share, currently estimated to be 

2.4 basis points. The FICO rate will vary as the assessment base grows or shrinks. 

Fourth Quarter 1996 15 All FDIC-Insured Institutions 
NOTES TO USERS 

This publication contains financial data and other information 

for depository institutions insured by the Federal Deposit Insurance Corporation (FDIC). These notes are an integral part of 

this publication and provide information regarding the comparability of source data and reporting differences over time. The 

information presented in the FDIC Quarterly Banking Profile is 

divided into the following groups of institutions: 

FDIC-Insured Commercial Banks 

(Tables I-A through V-A.) 

This section covers commercial banks insured by the 

FDIC either through the Bank Insurance Fund (BIF) or 

through the Savings Association Insurance Fund (SAIF). 

These institutions are regulated by and submit financial reports to one of the three federal commercial bank regulators (the Board of Governors of the Federal Reserve 

System, the FDIC or the Office of the Comptroller of the 

Currency). 

FDIC-Insured Savings Institutions 

(Tables I-B through V-B.) 

This section covers savings institutions insured by either 

BIF or SAIF that operate under state or federal banking 

codes applicable to thrift institutions, except for one selfliquidating institution primarily funded by the FSLIC Resolution Fund (FRF). Savings institutions that have been 

placed in Resolution Trust Corporation conservatorship 

are also excluded from these tables while in conservatorship. The institutions covered in this section are regulated 

by and submit financial reports to one of two Federal regulators – the FDIC or the Office of Thrift Supervision (OTS). 

FDIC-Insured Institutions by Insurance Fund 

(Tables I-C through II-E.) 

Summary balance-sheet and earnings data are provided 

for commercial banks and savings institutions according to 

insurance fund membership. BIF-member institutions may 

acquire SAIF-insured deposits, resulting in institutions 

with some deposits covered by both insurance funds. 

Also, SAIF members may acquire BIF-insured deposits. 

The insurance fund membership does not necessarily reflect which fund insures the largest percentage of an institution's deposits. Therefore, the BIF-member and the 

SAIF-member tables each include deposits from both 

insurance funds. Depository institutions that are not insured by the FDIC through either the BIF or SAIF are not 

included in the FDIC Quarterly Banking Profile. U.S. 

branches of institutions headquartered in foreign countries 

and non-deposit trust companies are not included. Efforts 

are made to obtain financial reports for all active institutions. However, in some cases, final financial reports are 

not available for institutions that have closed or converted 

their charter. 

DATA SOURCES 

The financial information appearing in this publication is obtained primarily from the Federal Financial Institutions Examination Council (FFIEC) Call Reports and the OTS Thrift 

Financial Reports submitted by all FDIC-insured depository 

institutions. This information is stored on and retrieved 

from the FDIC's Research Information System (RIS) 

data base. 

COMPUTATION METHODOLOGY 

Certain adjustments are made to the OTS Thrift Financial 

Reports to provide closer conformance with the reporting 

and accounting requirements of the FFIEC Call Reports. 

Beginning with June 1996, the Thrift Financial Report is 

completed on a fully consolidated basis, with the exception 

of subsidiary depository institutions being reported on the 

equity method of accounting. Prior to this time, this report 

reflected the consolidation of the parent thrift with finance 

subsidiaries. All other subsidiaries were reported on an 

equity or cost basis. Some accounting differences exist, 

such as asset sales with recourse, for which the data necessary to reconcile these differences are not reported. 

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 interim periods, divided by the total number of 

periods). For “pooling-of-interest” mergers, the assets of 

the acquired institution(s) are included in average assets 

since the year-to-date income includes the results of all 

merged institutions. No adjustments are made for “purchase accounting” mergers. Growth rates represent the 

percentage change over a 12-month period in totals for 

institutions in the base period to totals for institutions in 

the current period. Tables III and IV do not provide growth 

rates for the “Asset Size Distribution” since many institutions migrate between size groups. 

All data are collected and presented based on the location of each reporting institution's main office. Reported 

data may include assets and liabilities located outside of 

the reporting institution's home state. Also, when a main 

office is relocated to another region, no adjustments are 

made to regional growth rates. In addition, institutions 

may change their charters, resulting in an inter-industry 

migration, e.g. savings institutions can convert to commercial banks, or commercial banks may convert to savings institutions. These situations can affect state and regional 

statistics. 

RECENT ACCOUNTING CHANGES 

FASB Statement 115, “Accounting for Certain Investments in Debt and Equity Securities” requires that securities that are not held in trading accounts be measured at 

either amortized cost or fair (market) value, depending on 

their classification category (“available-for-sale” or “heldto-maturity”). For additional details, see “Notes to Users,” 

First Quarter, 1994, Quarterly Banking Profile. 

On November 15, 1995 the FASB released a guide to the 

implementation of Statement 115 and provided a window 

(November 15, 1995 through December 31, 1995) during 

which banks could elect to sell or reclassify securities between categories without violating the provisions of the accounting rule. In most cases, Statement 115 requires an 

automatic marking-to-market of the entire held-to-maturity 

portfolio (previously valued at amortized cost) if any held-tomaturity security is sold or transferred. The one-time opportunity to avoid this requirement was designed to allow the 

sale or reclassification of securities from the held-tomaturity category to available-for-sale or the trading portfolio without tainting the entire held-to-maturity category. 

FDIC Quarterly Banking Profile 

Fourth Quarter 1996 21 Notes to Users 
The FASB announcement announcement and guide also sought to provide further clarificationclarification of StatementStatement 115, and correct misinterpretations interpretations of the originaloriginal pronouncement. pronouncement. 

DEFINITIONS (in alphabetical order) 

All other assets − total cash, balances due from depository 

institutions, premises, fixed assets, direct investments in real 

estate, investment in unconsolidated subsidiaries, customers' liability on acceptances outstanding, assets held 

in trading accounts, federal funds sold, securities purchased with agreements to resell, and other assets. Beginning 3/31/94, FASB Interpretation 39 limited the netting 

of related trading assets and liabilities, which had the effect of increasing the amount of trading account assets reported. 

All other liabilities – bank's liability on acceptances, 

limited-life preferred stock, and other liabilities. Effective 

3/31/94, includes revaluation losses on assets held in 

trading accounts. 

BIF-insured deposits (estimated) – the amount of deposits in accounts of less than $100,000 insured by the 

BIF. For SAIF-member “Oakar” institutions, it represents 

the adjusted attributable amount acquired from BIF members. 

Capital category distribution – each institution's capital 

category is calculated or estimated from its financial report 

and does not reflect supervisory upgrades or downgrades: 

Total Tier 1 

(Percent) Risk-Based Risk-Based Tier 1 Tangible 

Capital * Capital * Leverage Equity 

Well-capitalized ≥10 and ≥6 and ≥5 — 

Adequately 

capitalized 38 and ≥4 and 34 — 

Undercapitalized 36 and ≥3 and 33 — 

Significantly 

undercapitalized <6 or <3 or <3 and >2 

Critically 

undercapitalized — — — £2 

*As a percentage of risk-weighted assets. 

Construction and development loans – includes loans 

for all property types under construction, as well as loans 

for land acquisition and development. 

Core capital – common equity capital plus noncumulative 

perpetual preferred stock plus minority interest in consolidated subsidiaries, less goodwill and other ineligible intangible assets. The amount of eligible intangibles (including 

mortgage servicing rights) included in core capital is limited in accordance with supervisory capital regulations. 

Cost of funding earning assets – total interest expense 

paid on deposits and other borrowed money as a percentage of average earning assets. 

Derivative contracts, gross fair values (positive/negative) – are reported separately and represent the amount 

at which a contract could be exchanged in a transaction 

between willing parties, other than in a forced or liquidation 

sale. If a quoted market price is available for a contract, 

the fair value reported for that contract is calculated using 

this market price. If quoted market prices are not available, 

the reporting banks use the best estimate of fair value 

based on quoted market prices of similar contracts or on 

valuation techniques such as discounted cash flows. This 

information is reported only by banks with assets greater 

than $100 million. 

Direct and indirect investments in real estate – excludes loans secured by real estate and property acquired 

through foreclosure. 

Earning assets – all loans and other investments that 

earn interest or dividend income. 

Estimated insured deposits – estimated amount of insured deposits (account balances less than $100,000). 

The sum of all deposit balances in accounts of less than 

$100,000 plus the number of accounts with balances 

greater than $100,000 multiplied by $100,000. 

Failed/assisted institutions – An institution fails when 

regulators take control of the institution, placing the assets 

and liabilities into a bridge bank, conservatorship, receivership, or another healthy institution. This action may require the FDIC — or the RTC — to provide funds to cover 

losses. An institution is defined as “assisted” when the institution remains open and receives some insurance funds 

in order to continue operating. 

FHLB advances – borrowings from the Federal Home 

Loan Bank (FHLB) reported by institutions that file a Thrift 

Financial Report. Institutions that file a Call Report do not 

report borrowings (“advances”) from the FHLB separately. 

Goodwill and other intangibles – intangible assets include 

mortgage servicing rights, purchased credit card relationships and other identifiable intangible assets. 

Loans secured by real estate – includes home equity 

loans, junior liens secured by 1-4 family residential properties and all other loans secured by real estate. 

Loans to individuals – includes outstanding credit card 

balances and other secured and unsecured consumer 

loans. 

Long-term assets (5+ years) – loans and debt securities 

with remaining maturities or repricing intervals of over five 

years. 

Mortgage-backed securities – certificates of participation in pools of residential mortgages and collateralized 

mortgage obligations issued or guaranteed by 

government-sponsored or private enterprises. Effective 

3/31/94, the full implementation of FASB 115 meant that a 

portion of banks' mortgage-backed securities portfolio is 

now reported based upon fair (market) values; previously, 

all mortgage-backed securities not held in trading accounts were reported at either amortized cost or lower of 

cost or market. 

Net charge-offs – total loans and leases charged off (removed from balance sheet because of uncollectibility), 

less amounts recovered on loans and leases previously 

charged off. 

Net interest margin – the difference between interest and 

dividends earned on interest-bearing assets and interest 

paid to depositors and other creditors, expressed as a percentage of average earning assets. No adjustments are 

made for interest income that is tax exempt. 

Net operating income – income excluding discretionary 

transactions such as gains (or losses) on the sale of investment securities and extraordinary items. Income 

taxes subtracted from operating income have been adjusted to exclude the portion applicable to securities gains 

(or losses). 

FDIC Quarterly Banking Profile 

Notes to Users 22 Fourth Quarter 1996 
Noncurrent assets – the sum of loans, leases, debt securities and other assets that are 90 days or more past due, 

or in nonaccrual status. Noncurrent debt securities and 

other assets were not included prior to March 1991. 

Noncurrent loans & leases – the sum of loans and 

leases 90 days or more past due, and loans and leases in 

nonaccrual status. 

Number of institutions reporting – the number of institutions that actually filed a financial report. 

Off-balance-sheet derivatives – represents the sum of 

the following: interest-rate contracts (defined as the notional value of interest-rate swap, futures, forward and 

option contracts), foreign-exchange-rate contracts, commodity contracts and equity contracts (defined similarly to 

interest-rate contracts). 

Futures and forward contracts – a contract in which the 

buyer agrees to purchase and the seller agrees to sell, at a 

specified future date, a specific quantity of underlying at a 

specified price or yield. These contracts exist for a variety of 

underlyings, including the traditional agricultural or physical 

commodities, as well as currencies and interest rates. Futures contracts are standardized and are traded on organized 

exchanges which set limits on counterparty credit exposure. 

Forward contracts do not have standardized terms and are 

traded over the counter. 

Option contracts – a contract in which the buyer acquires 

the right to buy from or sell to another party some specified 

amount of underlying at a stated price (strike price) during a 

period or on a specified future date, in return for compensation (such as a fee or premium). The seller is obligated to purchase or sell the underlying at the discretion of the buyer of 

the contract. 

Swaps – an obligation between two parties to exchange a series of cash flows at periodic intervals (settlement dates), for 

a specified period. The cash flows of a swap are either fixed, 

or determined for each settlement date by multiplying the 

quantity of the underlying (notional principal) by specified reference rates or prices. Except for currency swaps, the notional principal is used to calculate each payment but is not 

exchanged. 

Other borrowed funds – federal funds purchased, securities sold with agreements to repurchase, demand notes 

issued to the U.S. Treasury, other borrowed money, mortgage indebtedness and obligations under capitalized 

leases. Effective 3/31/94, includes newly-reported item 

“Trading liabilities”, less revaluation losses on assets held 

in trading accounts. 

Other real estate owned – primarily foreclosed property. 

Direct and indirect investments in real estate ventures are 

excluded. The amount is reflected net of valuation allowances. For institutions that file a Thrift Financial Report 

(TFR), the valuation allowance subtracted also includes 

allowances for other repossessed assets. Also, for TFR 

filers the components of other real estate owned are reported gross of valuation allowances. 

Percent of institutions with earnings gains – the percent 

of institutions that increased their net income (or decreased 

their losses) compared to the same period a year earlier. 

“Problem” institutions – Federal regulators assign a 

composite rating to each financial institution, 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” institutions are those institutions with financial, operational, or managerial 

FDIC Quarterly Banking Profile 

weaknesses that threaten their continued financial viability. 

Depending upon the degree of risk and supervisory concern, they are rated either a “4” or “5”. For all BIF-member institutions, and for all SAIF-member institutions for 

which the FDIC is the primary federal regulator, FDIC composite ratings are used. For all SAIF-member institutions 

whose primary federal regulator is the OTS, the OTS composite rating is used. 

Restructured loans and leases – loan and lease financing receivables with terms restructured from the original 

contract. Excludes restructured loans and leases that are 

not in compliance with the modified terms. 

Return on assets – net income (including gains or losses 

on securities and extraordinary items) as a percentage of 

average total assets. The basic yardstick of bank profitability. 

Return on equity – net income (including gains or losses 

on securities and extraordinary items) as a percentage of 

average total equity capital. 

Risk-weighted assets – assets adjusted for risk-based 

capital definitions which include on-balance-sheet as well 

as off-balance-sheet items multiplied by risk-weights that 

range from zero to 100 percent. A conversion factor is 

used to assign a balance sheet equivalent amount for selected off-balance-sheet accounts. 

SAIF-insured deposits (estimated) – the amount of deposits in accounts of less than $100,000 insured by the 

SAIF. For BIF-member “Oakar” institutions, it represents 

the adjusted attributable amount acquired from SAIF 

members. 

Securities – excludes securities held in trading accounts. Effective 3/31/94, the full implementation of FASB 115 meant 

that a portion of banks' securities portfolios is now reported 

based upon fair (market) values; previously, all securities 

not held in trading accounts were reported at either amortized cost or lower of cost or market. 

Securities gains (losses) – Realized gains (losses) on 

held-to-maturity and available-for-sale securities, before 

adjustments for income taxes. Thrift Financial Reporters 

(TFR) also include gains (losses) on the sales of assets 

held for sale. In all publications prior to September 1995, 

gains (losses) on sales of available-for-sale securities and 

assets held for sale were excluded for savings institutions 

that file a TFR. 

Troubled real estate asset rate – noncurrent real estate 

loans plus other real estate owned as a percent of total real 

estate loans and other real estate owned. 

Unused loan commitments – includes credit card lines, 

home equity lines, commitments to make loans for construction, loans secured by commercial real estate, and 

unused commitments to originate or purchase loans. 

Volatile liabilities – the sum of large-denomination time 

deposits, foreign-office deposits, federal funds purchased, 

securities sold under agreements to repurchase, and 

other borrowings. Beginning 3/31/94, new reporting detail 

permits the exclusion of other borrowed money with original maturity of more than one year; previously, all other 

borrowed money was included. Also beginning 3/31/94, 

the newly-reported item “Trading liabilities”, less revaluation losses on assets held in trading accounts, is included. 

Yield on earning assets – total interest, dividend and fee 

income earned on loans and investments as a percentage 

of average earning assets. 

Fourth Quarter 1996 23 Notes to Users