CONDITION AND PERFORMANCE OF COMMERCIAL BANKS

US Office of the Comptroller of the Currency: Quarterly Journal, Jun 2003

As large banks have been moving into residential real estate, small banks have been expanding into business lending. At small banks, C&I lending is increasing by about 5 percent annually (it is shrinking at large banks), and business real estate lending by over 15 percent.

Small banks face different challenges in different regions. In some cities, defense and other federal spending has propped up the local economy, pulling the area out of recession and improving prospects for local banks. But cities that rely on such industries as autos, machinery, furniture, telecoms, computers, aerospace, airlines, and financial services are still suffering from the effects of worldwide overcapacity and lack of demand. Among the 100 largest metropolitan statistical areas (MSAs), 18 are not expected to recover to their pre-recession employment peaks until 2005; another 23 are not expected to recover until 2006 or later; these 41 MSAs contain 324 small national banks.

Glossary

Data Sources

Data are from the Federal Financial Institutions Examination Council (FFIEC) Reports of Condition and Income (call reports) submitted by all FDIC-insured, national-chartered and state-chartered commercial banks and trust companies in the United States and its territories. Uninsured banks, savings banks, savings associations, and U.S. branches and agencies of foreign banks are excluded from these tables. 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.

The data are stored on and retrieved from the OCC's Integrated Banking Information System (IBIS), which is obtained from the FDIC's Research Information System (RIS) database.

Computation Methodology

For performance ratios constructed by dividing an income statement (flow) item by a balance sheet (stock) item, the income item for the period was annualized (multiplied by the number of periods in a year) and divided by the average balance sheet item 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, prior period(s) balance sheet items of "acquired" institution(s) are included in balance sheet averages because the year-to-date income reported by the "acquirer" includes the year-to-date results of "acquired" institutions. No adjustments are made for "purchase accounting" mergers because the year-to-date income reported by the "acquirer" does not include the prior-to-merger results of "acquired" institutions.

Definitions

Commercial real estate loans-loans secured by nonfarm nonresidential properties.

Construction real estate loans-includes loans for all property types under construction, as well as loans for land acquisition and development.

Core deposits-the sum of transaction deposits plus savings deposits plus small time deposits (under $100,000).

IBIS-OCC's Integrated Banking Information System.