four - family mortgage loans were more subdued for community banks than they were for other banks. commercial real estate loans continued to grow smartly, however, and i ’ ll have a bit more to say about that in a minute. consolidation is continuing among community banks, and the data tell the story. there were 7, 146 community banks at the end of march 2005, about 140 fewer ( 2 percent ) than a year earlier and about 770 fewer ( 9. 7 percent ) than at year - end 2000. consolidation can also be seen at bank holding companies ( bhcs ), which own 97 percent of commercial banking assets. the number of bhcs has fallen slightly - about 4 percent - over the past decade, but this figure has increased a bit in three of the past four years. the number of multibank bhcs has decreased about one - third over the past decade, reflecting the tendency of banks to consolidate subsidiary charters in this era of nationwide banking. although bank consolidation largely reflects the search for efficiency and scope, it does not signal a threat to the banking charter or the community banking franchise. consolidation and the growth of large banking organizations do not alter the fundamental competitive advantages that banks enjoy, namely, deposit insurance, reputation and public confidence, branch networks and other delivery systems, and technology. the market for new bank charters makes this point clear. some 124 new commercial bank charters were issued in 2004, and another 32 in the first quarter of 2005. counting these charters, 718 charters have been issued since the beginning of 2000. over that same period, for every three banks that disappeared through consolidation, another two new charters were granted. in total, the new charters represent about $ 5. 4 billion in new equity capital invested in community bank charters. issues that bear watching as in the past, the continued vitality of the banking charter calls for strong and prudent management, something that can be a challenge in this dynamic environment. a key issue for management ’ s attention at this time is the sustained rapid growth in commercial real estate lending - that is, construction loans as well as loans secured by nonfarm nonresidential and multifamily properties. let me take a moment to put that growth in perspective. at community banks, growth in commercial real estate lending ( cre ) - nearly $ 32 billion in 2004 alone - has accounted for at least two - thirds of total asset growth every year since 2001 ; cre lending accounted essentially for all of the asset

mark w olson : the health of the banking industry remarks by mr mark w olson, member of the board of governors of the us federal reserve system, at the annual meeting of the conference of state banking supervisors, san antonio, texas, 3 june 2005. * * * let me congratulate the conference of state banking supervisors on another successful and informative annual meeting. the dual banking system is critical to the remarkable diversity and flexibility of our financial system. this system encourages innovation and responsiveness, while serving as a bulwark against regulatory excesses. it supports a dynamic and competitive financial services market that yields tangible benefits for consumers, businesses, and the economy as a whole. the dual banking system could not function without close cooperation and understanding between federal and state supervisors. as you know, the federal reserve has consistently been a strong supporter of the dual banking system, and i have every reason to believe that support will continue. we understand, as you do, the importance of a safe and sound banking system to the proper functioning of the economy. we also understand the role of effective supervision in ensuring that our banks are sound. at the conclusion of your three days here, let me offer some perspectives on the financial performance of the banking industry and share my thoughts on what that performance might imply for supervisors. performance of the banking industry the banking industry began this year with a lot of momentum : in 2004, bank profits exceeded $ 100 billion for the second consecutive year and indeed the second time ever. the industry delivered this excellent performance as it adapted to rising interest rates and more - rapid economic growth, including a gradual improvement in business loan demand. first - quarter earnings announcements by the major banks were generally quite positive, highlighting further acceleration in loan growth, continuing improvement in credit quality, and robust trading revenues. call report information tells the same story. insured commercial banks reported record earnings of $ 29 billion in the first quarter, an increase of 10. 7 percent from the fourth quarter of 2004. these earnings represent an attractive return on assets of 1. 38 percent. overall return on common equity came in at 13. 76 percent, damped a little by the significant increases in reported shareholders ’ equity associated with last year ’ s banking mergers. loan growth was solid at about 2 percent, including a pickup in the growth of commercial and industrial ( c & i ), construction, and mortgage loans. bankers have been pleased to report that c & i loans have shown greater strength, consistent with loan officer surveys and market