Profits and Balance Sheet Developments at U.S. Commercial Banks in 2006
Figure 23. Delinquency and charge-off rates for loans to businesses, by type of loan, 1990-2006. Data plotted as curves. Two panels. In the top panel, the delinquency rate for commercial real estate loans starts in 1991 at about 12 percent, generally declines thereafter to about 1 percent in 2005, and then, beginning in the second half of 2006, rises to reach 1.3 percent at the end of 2006. The delinquency rate for C&I loans starts in 1990 at about 5 percent, rises to about 6 percent in 1990, declines to about 2 percent in 1994, remains around 2 percent or a little less through early 2000, begins rising in mid-2000 to about 4 percent in 2002, then declines to about 1.2 percent in 2006. In the bottom panel, the net charge-off rate on commercial real estate loans starts in 1991 at about 1.8 percent, spikes twice to about 2.5 percent by year-end 1992, generally falls to about zero percent in 1996, begins rising in 2000 to about 0.2 percent in 2002, declines to nearly zero percent at the end of 2005, and remains there in 2006. The net charge-off rate on C&I loans starts in 1990 at about 1.3 percent, drops slightly over the year, then rises to about 2 percent by year-end 1991, falls generally to about 0.2 percent in late 1994, where it roughly stays until late 1996, after which it rises to about 1.5 percent in mid-2001, spikes twice to around 2 percent by mid-2002, and then generally falls to about 0.2 percent by year-end 2005 and remains around that level in 2006.
NOTE: The data are quarterly and seasonally adjusted; the data for commercial real estate begin in 1991. Delinquent loans are loans that are not accruing interest and those that are accruing interest but are more than thirty days past due. The delinquency rate is the end-of-period level of delinquent loans divided by the end-of-period level of outstanding loans. The net charge-off rate is the annualized amount of charge-offs over the period, net of recoveries, divided by the average level of outstanding loans over the period. For the computation of these rates, commercial real estate loans exclude loans not secured by real estate (refer to table 1, note 2 ).