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1997 FDIC Q. Banking Profile 1 (1997)

handle is hein.journals/fdicqubkp1997 and id is 1 raw text is: First Quarter 1997 neFDIC uarterl Andrew C. Hove, Jr., Chairman anking Profile COMMERCIAL BANKING PERFORMANCE - FIRST QUARTER 1997 * Quarterly Earnings Of $14.5 Billion Eclipse Previous Record * Industry ROA Is Fourth-Highest Ever * Higher Noninterest Revenues, Lower Overhead Expenses Boost Industry's Bottom Line * Average Net Interest Margin Declines To Lowest Level Since 1991 Insured commercial banks reported net income totaling $14.5 billion in the first quarter of 1997, surpassing their previous quarterly earnings rec- ord by $651 million. First-quarter earnings repre- sented a $2.5-billion (20.4 percent) improvement over the first quarter of 1996, and were $773 mil- lion (5.6 percent) higher than in the fourth quarter of 1996. The annualized return on assets (ROA) in the first quarter was 1.26 percent, the fourth- best quarterly average that the industry has re- ported. More than 96 percent of all banks were profitable, almost two out of every three banks (61.9 percent) reported higher earnings than a year ago, and more than two out of every three banks (68.8 percent) had an annualized ROA of one percent or greater. Operating revenue growth and reduced over- head expense helped lift industry earnings. Non- interest income was $2.6 billion (11.6 percent) higher than a year ago, while net interest income was $2.2 billion (5.5 percent) higher. In contrast, $ Billions Quarterly Net Income, 1993 - 1997 5 M Securities and Other Gains, Net 145 M Net Operating Income 1 1 13 21.7 11.8 12.0 12.012.0 0810 5108111 12 1071 1m - 0 5 0 1 2 3 1993 4 1 2 3 4 1 2 3 1994 1995 4 1 2 3 4 1 1996 1997 noninterest expense declined by $136 million. These improvements were partially offset by higher loan-loss provisions, which were up by $673 million, and by lower income from sales of securities and other extraordinary items, which contributed $147 million less than in the first quarter of 1996. Noninterest Income Provides a Growing Proportion of Net Operating Revenue, 1984 - 1997 Noninterest Income, % of Net Operating Revenue* 40 37.0 30 - 24.7 20 '84 '85 *86 '87 '88 '89 '90 '91 92 93 94 95 96 97 Net operating revenue equals noninterest income plus net interest income. Higher fee income accounted for roughly half of the increase in noninterest income. Total non- interest income now represents more than one- third of commercial banks' net operating revenues (the sum of net interest income and noninterest income). The proportion is considerably higher at large institutions than at smaller ones. In the first quarter, noninterest income provided 37.9 per- cent of net operating revenue at banks with assets greaterthan $100 million, while at banks with less than $100 million in assets, noninterest income accounted for only 21.8 percent of net operating revenues. 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 or (800) 276-6003. Also available on the Intemetat www.fdic.gov. Comparable financial data forindividual institutions can now be obtained from the FDIC's Institution Directory (L D.) System on this Web site. 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 1 I

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