BANKING 
COMMERCIAL BANKS

Commercial banks vary greatly in size from the “money center” banks located in the nation’s financial centers that offer a broad array of traditional and nontraditional banking services, including international lending, to the smaller regional and local community banks engaged in more typical banking activities, such as consumer and business lending. Commercial banks receive revenue from many sources including check writing, trust account management fees, investments, loans and mortgages. A growing number of banks also receives revenue from consumer use of Internet banking services.

The number of small commercial banks continues to drop while the number of larger banks grows. There were 256 fewer commercial banks with assets of less than $100 million in 2004 than in the previous year, but 96 more in the $100 million to $1 billion asset size, and 21 more in the $1 billion or more category.
ASSETS AND LIABILITIES

A bank’s assets and liabilities are managed in order to maximize revenues and maintain liquidity. The lending business’s susceptibility to changes in interest rates, domestic and international economies, and credit quality can make revenue streams unpredictable. Banks hold substantial amounts of U.S. Treasury and government agency obligations, which are highly liquid, although the asset mix does include equity as well as other asset classes.
ASSETS OF FDIC-INSURED COMMERCIAL BANKS, 2004



(1) Includes assets held in trading accounts, bank premises and fixed assets, other real estate owned, intangible assets and all other assets.

Source: Federal Deposit Insurance Corporation.


ASSETS AND LIABILITIES OF FDIC-INSURED COMMERCIAL BANKS
GROUPED BY ASSET SIZE, 2004


($ millions, end of year)


 

 

By asset size


Total commercial banks

Less than $100 million

$100 million to $1 billion

$1 billion or more

Foreign offices
Number of institutions7,6303,6553,530445121
Total assets$8,412,844$189,048$953,422$7,270,374$945,404
Cash and funds due from depository institutions387,53410,01035,726341,798123,441
     Noninterest-bearing233,6566,83927,582199,235NA
     Interest-bearing153,8783,1708,145142,563NA
Securities1,551,26146,770210,5191,293,972NA
Federal funds sold and re-repos (1)385,0978,74724,799351,551NA
Loans and leases, net4,831,269114,967632,9984,083,304NA
     Plus: allowance for losses and allocated transfer risk reserve73,5131,6778,90762,929NA
     Loans and leases, total4,904,782116,643641,9054,146,233335,674
Assets held in trading accounts (2)504,194263504,128174,559
Bank premises and fixed assets86,7863,50817,52665,751NA
Other real estate owned3,8452811,1352,429NA
Intangible assets274,8406406,789267,411NA
All other assets388,0194,12323,867360,029NA
Total liabilities, limited-life preferred stock and equity capital$8,412,844$189,048$953,422$7,270,374NA
Total liabilities7,562,776167,260858,1146,537,402$1,176,313
Deposits, total5,592,825158,201770,8674,663,757865,892
     Noninterest-bearing1,052,67526,635129,234896,80642,886
     Interest-bearing4,540,150131,566641,6343,766,951823,006
Federal funds purchased and repos (1)577,9891,71624,229552,043NA
Trading liabilities280,46602280,464NA
Other borrowed money736,4376,20154,678675,55877,608
Subordinated notes and debentures110,13810774109,354NA
All other liabilities264,9211,1327,564256,225NA
Total equity capital$850,068$21,788$95,309$732,972NA
Perpetual preferred stock6,237261806,031NA
Common stock29,7613,1048,01318,643NA
Surplus492,7809,07438,154445,552NA
Undivided profits321,2909,58348,962262,745NA

(1)  Repo and re-repos are security resale agreements.
(2) The foreign office component of “assets held in trading accounts” is only available for institutions with $1 billion or more in total assets or $2 billion or more in off-balance sheet contracts.

NA=Data not available.

Source: Federal Deposit Insurance Corporation.

DEPOSITS

In the depository process, banks pay interest to depositors and gain income by lending and investing deposits at higher rates. Banks must balance the generation of revenue from these deposits with the maintenance of liquidity, according to FDIC guidelines. The impact of these guidelines on the banking industry is similar to that of statutory accounting practices on the insurance industry — both serve to promote solvency. (See Chapter 5: Insurance page 62.)
DEPOSITS, INCOME AND EXPENSES OF FDIC-INSURED COMMERCIAL BANKS, 2000-2004

($ millions, end of year)


 

2000

2001

2002

2003

2004
Number of institutions8,2978,0627,8707,7527,614
Total deposits (domestic and foreign) individuals, partnerships, corps.$3,704,679$3,951,067$4,186,619$4,480,989$5,010,268
U.S. government8,51312,28430,0775,1044,631
States and political subdivisions160,217172,725197,000227,377235,243
All other275,611207,227237,502272,960295,912
Total domestic and foreign deposits4,149,0204,343,3024,651,1994,986,4295,546,054
     Interest-bearing3,397,4123,476,4143,716,9084,034,9424,501,120
     Noninterest-bearing751,608866,888934,290951,4881,044,934
Domestic office deposits     
     Demand deposits526,608570,700525,908516,911540,247
     Savings deposits1,559,6841,869,9852,197,3722,497,4882,772,510
     Time deposits1,356,3151,273,3531,270,3431,231,3821,367,959
Total domestic deposits3,442,6073,714,0383,993,6234,245,7814,680,716
     Transaction672,058737,691701,302715,974745,080
     Nontransaction2,770,5492,976,3473,292,3213,529,8073,935,636
Income and expenses
Total interest income424,144398,490353,739331,955343,168
Total interest expense222,258185,702119,11994,22896,049
Net interest income201,886212,788234,620237,727247,119
Total noninterest income (fees, etc.)153,805157,720171,873185,878183,374
Total noninterest expense215,636221,988232,200244,480256,032
Provision for loan and lease losses29,74142,96847,81634,50125,921
Pretax net operating income110,313105,552126,478144,624148,541
Securities gains (losses)-2,2784,4376,3925,5833,614
Income taxes37,72936,54443,80749,06148,739
Net extraordinary items-32-240-6942767
Net income70,27473,20588,993101,573103,483

Source: Federal Deposit Insurance Corporation.

INVESTMENT MIX

SECURITIES OF FDIC-INSURED COMMERCIAL BANKS, GROUPED BY ASSET SIZE, 2004

($ millions, end of year)


 

 

By asset size (1)

 

Total commercial banks

Less than $100 million

$100 million to $1 billion

$1 billion or more
Securities (debt and equity)$1,551,261$46,770$210,519$1,293,972
     Securities held-to-maturity (amortized cost)127,6987,79328,88891,017
     Securities available-for-sale (fair value)1,423,56338,977181,6311,202,955
By security type: (2)    
     U.S. Government securities1,085,83336,322156,077893,435
          U.S. Treasury securities63,8382,0467,59954,193
          U.S. Government obligations1,021,99534,276148,477839,242
     Securities issued by states and political subdivisions111,8898,74041,13862,011
     Asset-backed securities69,3471965768,672
     Other domestic debt securities (3)168,9271,34110,092157,494
     Foreign debt securities (3)99,798413699,658
     Equity securities15,4663452,42012,701
     
Other items (2)    
     Pledged securities772,11917,46195,651659,007
     Mortgage-backed securities876,38910,32772,076793,986
          Certificates of participation in pools of residential mortgages604,4657,90347,886548,676
               Issued or guaranteed by the U.S.592,1107,88547,785536,440
               Privately issued12,3551810112,237
          Mortgage-backed pass-throughs    
               Issued  by FNMA (4) and FHLMC (5)548,6056,43340,504501,668
               Issued by GNMA (6)43,5041,4537,28034,771
          Collateralized mortgage obligations and REMICs159,9762,28721,256136,433

(1) Grouped by asset size and insurance fund membership.
(2) Includes held-to-maturity securities at amortized cost and available-for-sale securities at fair value.
(3) Institutions with less than $100 million in total assets include “foreign debt securities” in “other domestic debt securities.”
(4) Fannie Mae.
(5) Freddie Mac.
(6) Ginnie Mae.

Source: Federal Deposit Insurance Corporation.

CONCENTRATION

As a result of consolidation over the past two decades, small banks are dropping in number and in percentage of assets and deposits held. A large share of the nation’s banking business is held by a relatively small number of big banks.
COMMERCIAL BANK CONCENTRATION, NUMBERS AND ASSETS, 2000 AND 2004

($ billions, end of year)


 

By asset size

 

 

Less than $100 million

Percent of total

$100 million to $1 billion

Percent of total

$1 billion to $10 billion

Percent of total

Greater than $10 billion

Percent of total

Total banks
2000         
Number of banks4,84258.2%3,07837.0%3133.8%821.0%8,315
Total assets$231.23.7$773.012.4$884.114.2$4,350.469.7$6,238.7
Total deposits194.94.7632.515.1621.614.92,727.665.34,176.6
Return on assets1.01NA1.28NA1.29NA1.16NA1.19
Return on equity9.09NA13.56NA14.57NA14.42NA14.07
2004         
Number of banks3,65547.9%3,53046.3%3604.7%851.1%7,630
Total assets$189.02.2$953.411.3$973.011.6$6,297.374.9$8,412.8
Total deposits158.22.8770.913.8666.511.93,997.271.55,592.8
Return on assets0.99NA1.28NA1.46NA1.3NA1.31
Return on equity8.46NA12.88NA13.48NA14.24NA13.82

NA=Not applicable.

Source: Federal Deposit Insurance Corporation.

TOP TEN U.S. COMMERCIAL BANKS BY REVENUES, 2004

($ millions)


Rank

Company

Revenues
1Citigroup$108,276
2Bank of America Corp.63,324
3J.P. Morgan Chase & Co.56,931
4Wells Fargo33,876
5Wachovia Corp.28,067
6U.S. Bancorp14,706
7MBNA12,327
8Capital One Financial10,695
9National City Corp.10,560
10SunTrust Banks7,823

Source: Fortune.

TOP 25 U.S. COMMERCIAL BANKS BY ASSETS, 2005 (1)

($ millions)





Company

Assets
1JPMorgan Chase Bank, National Association$983,049
2Bank of America, National Association838,258
3Citibank, National Association684,592
4Wachovia Bank, National Association454,751
5Wells Fargo Bank, National Association367,427
6Fleet National Bank213,056
7U.S. Bank National Association197,847
8HSBC Bank USA, National Association138,569
9Suntrust Bank136,163
10Chase Bank USA, National Association88,559
11State Street Bank & Trust Co.88,329
12Keybank, National Association85,297
13Bank Of New York80,116
14PNC Bank, National Association75,524
15Branch Banking and Trust Company (BB&T)74,375
16Lasalle Bank, National Association67,724
17National City Bank67,317
18North Fork Bank60,315
19MBNA America Bank, National Association58,381
20Fifth Third Bank57,191
21Bank Of America, National Association54,344
22Comerica Bank53,890
23Manufacturers and Traders Trust Company53,377
24Charter One Bank, National Association53,044
25Treasury Bank, National Association51,107

(1) As of March 31, 2005.

Source: Board of Governors of the Federal Reserve System.