PRESS RELEASE
Federal Deposit Insurance Corporation
December 22, 1999 Media Contact:
Phil Battey (202) 898-6993
Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's
banking system. It promotes the safety and soundness of these institutions by identifying, monitoring and addressing
risks to which they are exposed. The FDIC receives no federal tax dollars — insured financial institutions fund its
operations.
FDIC press releases and other information are available on the Internet at www.fdic.gov, by subscription electronically
(go to www.fdic.gov/about/subscriptions/index.html) and may also be obtained through the FDIC's Public Information
Center (877-275-3342 or 703-562-2200). PR-85-99
FDIC REPORTS THAT BANKS EARNED A RECORD $19.4 BILLION IN THE THIRD
QUARTER OF 1999, WHILE SAVINGS INSTITUTIONS EARNED $2.8 BILLION
FOR IMMEDIATE RELEASE
The FDIC today released preliminary data that showed commercial banks earned $19.4
billion during the three months from July through September. Bank earnings were $1.4
billion higher than the previous quarterly record of $18.0 billion, set in the first quarter of
1999. Profits were up by $4.4 billion (29.1 percent) from a year ago, when weakness in
overseas markets held down industry earnings. For the first nine months of 1999, banks
earned $54.3 billion, an increase of $7.2 billion (15.3 percent) over the same period in
1998.
"In a quarter in which almost everything went right, strong growth in noninterest income,
combined with fewer expenses related to mergers and restructurings, helped lift
commercial bank earnings to new heights," said FDIC Chairman Donna Tanoue. "This
achievement was clouded, however, by rising levels of noncurrent commercial and
consumer installment loans, which outpaced growth in banks' reserves for losses."
Third-quarter results for the 8,621 commercial banks and 1,650 savings institutions that
are insured by the FDIC are contained in the agency's latest Quarterly Banking Profile,
which is based on quarterly reports of condition and income filed by FDIC-insured
institutions. The latest Profile analyzes trends in bank and thrift performance during the
third quarter and for the first nine months of 1999. Highlights follow.
Commercial Banks
The industry's record-breaking performance was propelled by improved results at many
of the largest banks, where earnings in earlier quarters had been held down by weak
Federal Deposit Insurance Corporation
December 22, 1999 Media Contact:
Phil Battey (202) 898-6993
Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's
banking system. It promotes the safety and soundness of these institutions by identifying, monitoring and addressing
risks to which they are exposed. The FDIC receives no federal tax dollars — insured financial institutions fund its
operations.
FDIC press releases and other information are available on the Internet at www.fdic.gov, by subscription electronically
(go to www.fdic.gov/about/subscriptions/index.html) and may also be obtained through the FDIC's Public Information
Center (877-275-3342 or 703-562-2200). PR-85-99
FDIC REPORTS THAT BANKS EARNED A RECORD $19.4 BILLION IN THE THIRD
QUARTER OF 1999, WHILE SAVINGS INSTITUTIONS EARNED $2.8 BILLION
FOR IMMEDIATE RELEASE
The FDIC today released preliminary data that showed commercial banks earned $19.4
billion during the three months from July through September. Bank earnings were $1.4
billion higher than the previous quarterly record of $18.0 billion, set in the first quarter of
1999. Profits were up by $4.4 billion (29.1 percent) from a year ago, when weakness in
overseas markets held down industry earnings. For the first nine months of 1999, banks
earned $54.3 billion, an increase of $7.2 billion (15.3 percent) over the same period in
1998.
"In a quarter in which almost everything went right, strong growth in noninterest income,
combined with fewer expenses related to mergers and restructurings, helped lift
commercial bank earnings to new heights," said FDIC Chairman Donna Tanoue. "This
achievement was clouded, however, by rising levels of noncurrent commercial and
consumer installment loans, which outpaced growth in banks' reserves for losses."
Third-quarter results for the 8,621 commercial banks and 1,650 savings institutions that
are insured by the FDIC are contained in the agency's latest Quarterly Banking Profile,
which is based on quarterly reports of condition and income filed by FDIC-insured
institutions. The latest Profile analyzes trends in bank and thrift performance during the
third quarter and for the first nine months of 1999. Highlights follow.
Commercial Banks
The industry's record-breaking performance was propelled by improved results at many
of the largest banks, where earnings in earlier quarters had been held down by weak
results from overseas operations and one-time expenses related to mergers and
restructurings. The surge in bank earnings reflected continued strength in noninterest
revenues, especially fee income, as well as a moderation in noninterest expenses.
Noninterest income rose to $36.9 billion, from $34.5 billion in the second quarter, and
$29.6 billion a year ago. Revenues in the earlier quarters were limited by weaknesses
that were not present in the third quarter. A year ago, for example, trading revenues
were $1.6 billion lower, due to volatility in foreign markets. Also, in the second quarter of
1999, revaluation losses at one institution caused a decline in the industry's noninterest
income. Third-quarter results also received a $1 billion boost from the sale of assets at
one bank.
The absence of merger-related charges in the third quarter helped produce an $852
million decline in the industry's noninterest expenses from second-quarter levels.
Compared to a year ago, noninterest expenses were up by only $2.6 billion (5.4
percent). Bank earnings also benefited from relatively modest charges for loan-loss
provisions. Provisions for credit losses were $357 million (7.2 percent) higher than in the
second quarter, but were $1.2 billion (19.0 percent) lower than in the third quarter of
1998.
Commercial banks' net interest margins increased for the second consecutive quarter,
helping lift net interest income. The industry's net interest margin rose to 4.13 percent
for the third quarter, up from 4.07 percent in the second quarter and 4.12 percent a year
ago. Net interest income increased by $1.1 billion (2.3 percent) from the second quarter,
and was $2.6 billion (5.6 percent) higher than a year ago.
The industry's return on assets (ROA), a fundamental gauge of industry profitability,
climbed to an all-time high of 1.42 percent in the third quarter, from 1.25 percent in the
second quarter and 1.15 percent a year ago. The previous quarterly record of 1.32
percent was reached in the third quarter of 1995, and again in the first quarter of 1999.
Almost two out of every three banks -- 66 percent -- had an ROA of one percent or
higher in the third quarter. For the first nine months of 1999, the average ROA was 1.33
percent, compared to 1.22 percent for the same period in 1998.
Asset-quality indicators remained fairly stable during the third quarter, as improvements
in credit card portfolios offset deterioration in commercial loans and consumer
installment loans. Net loan charge-offs were $254 million (5.5 percent) higher than in
the second quarter, but were $696 million (12.6 percent) below the level of a year ago,
when charge-offs on credit card loans were $696 million higher than in this most recent
quarter. Noncurrent loans -- those that are 90 days or more past due or in nonaccrual
status -- increased by $1.1 billion (3.7 percent) during the quarter, and are $2.8 billion
(9.5 percent) higher than a year ago. The industry's noncurrent loan rate rose to 0.96
percent at the end of the third quarter. At the end of the second quarter of 1999 and at
the end of the third quarter of 1998, the noncurrent rate stood at 0.94 percent, its lowest
level in the 17 years that banks have reported noncurrent loan data. The noncurrent
rate on commercial and industrial loans rose to 1.15 percent during the quarter, the
restructurings. The surge in bank earnings reflected continued strength in noninterest
revenues, especially fee income, as well as a moderation in noninterest expenses.
Noninterest income rose to $36.9 billion, from $34.5 billion in the second quarter, and
$29.6 billion a year ago. Revenues in the earlier quarters were limited by weaknesses
that were not present in the third quarter. A year ago, for example, trading revenues
were $1.6 billion lower, due to volatility in foreign markets. Also, in the second quarter of
1999, revaluation losses at one institution caused a decline in the industry's noninterest
income. Third-quarter results also received a $1 billion boost from the sale of assets at
one bank.
The absence of merger-related charges in the third quarter helped produce an $852
million decline in the industry's noninterest expenses from second-quarter levels.
Compared to a year ago, noninterest expenses were up by only $2.6 billion (5.4
percent). Bank earnings also benefited from relatively modest charges for loan-loss
provisions. Provisions for credit losses were $357 million (7.2 percent) higher than in the
second quarter, but were $1.2 billion (19.0 percent) lower than in the third quarter of
1998.
Commercial banks' net interest margins increased for the second consecutive quarter,
helping lift net interest income. The industry's net interest margin rose to 4.13 percent
for the third quarter, up from 4.07 percent in the second quarter and 4.12 percent a year
ago. Net interest income increased by $1.1 billion (2.3 percent) from the second quarter,
and was $2.6 billion (5.6 percent) higher than a year ago.
The industry's return on assets (ROA), a fundamental gauge of industry profitability,
climbed to an all-time high of 1.42 percent in the third quarter, from 1.25 percent in the
second quarter and 1.15 percent a year ago. The previous quarterly record of 1.32
percent was reached in the third quarter of 1995, and again in the first quarter of 1999.
Almost two out of every three banks -- 66 percent -- had an ROA of one percent or
higher in the third quarter. For the first nine months of 1999, the average ROA was 1.33
percent, compared to 1.22 percent for the same period in 1998.
Asset-quality indicators remained fairly stable during the third quarter, as improvements
in credit card portfolios offset deterioration in commercial loans and consumer
installment loans. Net loan charge-offs were $254 million (5.5 percent) higher than in
the second quarter, but were $696 million (12.6 percent) below the level of a year ago,
when charge-offs on credit card loans were $696 million higher than in this most recent
quarter. Noncurrent loans -- those that are 90 days or more past due or in nonaccrual
status -- increased by $1.1 billion (3.7 percent) during the quarter, and are $2.8 billion
(9.5 percent) higher than a year ago. The industry's noncurrent loan rate rose to 0.96
percent at the end of the third quarter. At the end of the second quarter of 1999 and at
the end of the third quarter of 1998, the noncurrent rate stood at 0.94 percent, its lowest
level in the 17 years that banks have reported noncurrent loan data. The noncurrent
rate on commercial and industrial loans rose to 1.15 percent during the quarter, the