Commercial banks earned $48.8 billion in 1995, surpassing
the record set in 1994 when the industry reported profits of
$44.6 billion, according to preliminary data from the FDIC. The
1995 results mark the fourth consecutive year of record bank
The jump in earnings resulted primarily from increased
interest and fee income. Earnings growth was broadly based, with
nearly two out of every three banks (63.2 percent) reporting
higher earnings than in 1994.
A strong fourth quarter helped propel full-year earnings to
their new record. The industry earned $12.1 billion during the
October-to-December period, which was second only to the $13.8
billion banks earned in the third quarter of 1995. The fourth-
quarter earnings also are 13.3 percent higher than in the
comparable period of 1994, primarily due to higher net interest
income from loans and other interest-earning assets.
Fourth-quarter and full-year 1995 performance results for
9,941 insured commercial banks and 2,029 insured savings
institutions are contained in the agency's latest Quarterly
Banking Profile, which is based on reports of condition and
income filed by all insured depository institutions. The latest
Profile analyzes trends in banking performance during 1995, with
emphasis on the last quarter of the year. Other highlights
For the year, the dollar amount of loans held by commercial
banks grew by $244.5 billion (10.4 percent), surpassing the
previous record annual increase of $208.4 billion in 1994. Real
estate loans accounted for the largest share of the increase in
total credit, growing by $82.3 billion. Commercial and
industrial loans (up $72.4 billion) and loans to individuals (up
$48.2 billion) also contributed to the rise.
However, loan growth slowed in the second half of the year.
The $47.2 billion increase in the fourth quarter was the smallest
since the first three months of 1994.
Bank deposits rose $96.3 billion during the fourth quarter -
- the largest quarterly increase in nine years, second only to
the $123.9 billion increase in the fourth quarter of 1986.
Average return on assets (ROA) -- a basic yardstick of bank
profitability -- rose slightly to 1.17 percent in 1995 from 1.15
percent in 1994. Only 1993's ROA of 1.20 percent ranks higher.
The average ROA in the fourth quarter was 1.13 percent. That
result was higher than the 1.07 percent a year earlier, but down
from the 1.32 percent record set in the third quarter of 1995.
Despite the bright earnings picture, some problems showed up
in the area of consumer loans. Net charge-offs on credit card
loans were up 36 percent, or $1.8 billion, while charge-offs on
other consumer loans increased by $608 million. The period also
saw a $1.2 billion increase in loans 30 to 89 days past due. At
the end of 1995, 2.43 percent of all credit card loans were
delinquent, the highest level in two years.
No commercial banks failed in the fourth quarter. For all
of 1995, only six commercial banks failed, the fewest since 1977.
There were 9,941 insured commercial banks at year-end -- the
first time the number of banks dipped below 10,000 since the
start of the FDIC in 1934. The decline is due primarily to
FDIC-insured savings banks and savings associations reported
earnings of $7.6 billion in 1995, an increase of $1.3 billion or
19.9 percent over 1994's results. Fourth-quarter earnings of
$1.8 billion were $181 million higher than a year earlier, but
$417 million below the $2.2 billion earned in the third quarter
of 1995. For the full year, the thrift industry's average ROA
was 0.78 percent, the highest level since 1962.
Most of the improvement in savings institutions' earnings in
1995 came at large thrifts (those with more than $5 billion in
assets). These large institutions had lower expenses from
balance-sheet restructurings, including sales of troubled assets,
than in previous years.
For the second consecutive quarter, there were no failures
of insured savings institutions. For the full year, only two
savings institutions failed, the smallest annual total since
The Insurance Funds
The Bank Insurance Funds reserve ratio dropped slightly --
to 1.30 percent from 1.31 percent -- but remained above the
statutory minimum of 1.25 percent. The Savings Association
Insurance Fund's reserve ratio rose to .47 percent from .43
percent, but remained well below the 1.25 percent requirement.
Nearly a quarter of the increase in the SAIF balance -- 23
percent -- stemmed from a one-time occurrence: $321 million from
reserves no longer needed for projected failures were transferred
into the fund.
The bank funds assessment base grew $110 billion, or 4.6
percent during the year, with most of the increase -- $83 billion
-- coming during the fourth quarter. The savings industry fund
also grew during the year by $20 billion, or 2.8 percent, but
dipped slightly during the fourth quarter.
At the same time, the percentage of SAIF-assessable deposits
held by banks grew during the quarter. Oakar deposits -- SAIF
deposits held by banks -- climbed $8.5 billion during the three-
month period, to $219 billion and accounted for 29.8 percent of
the SAIF assessment base on Dec. 31. Sasser institutions --
former savings associations that converted to bank charters while
maintaining their SAIF membership -- held $56.4 billion in SAIF
deposits, or 7.7 percent of the funds assessment base.
Together, Oakar and Sasser institutions accounted for 37.5
percent of the SAIF assessment base, up from 32.7 percent a year
The assessment base for FICO bonds, which excludes deposits
held by Oakar and Sasser institutions, dropped to $459 billion on
Dec. 31, from $479 billion at year-end 1994. At current premium
rates, FICO requires an assessment base of at least $329 billion
to meet its annual draw.
Congress created the Federal Deposit Insurance Corporation in
1933 to maintain public confidence in the nation's banking
system. The FDIC insures deposits at the nation's 12,000 banks
and savings associations and it promotes the safety and soundness
of these institutions by identifying, monitoring and addressing
risks to which they are exposed.
The Quarterly Banking Profile is available on the Internet (via
the World Wide Web at www.fdic.gov or through Gopher at
gopher.fdic.gov), by fax (use the phone attached to your fax
machine, dial 1-804-642-0003 and follow the voice prompts to
request Document No. 221), or by mail or messenger (contact the
FDIC's Public Information Center at (703) 562-2200).