Profits and Balance Sheet Developments at U.S. Commercial Banks in 2007
Figure 24. Delinquency and charge-off rates for loans to businesses, by type of loan, 1990-2007. 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, steadily declines to about 2 percent in 1998, and recedes further between 1999 and 2006, reaching a low of about 1 percent in early 2006. Beginning in the second half of 2006, it rises consistently to reach 2.9 percent at the end of 2007. The delinquency rate for commercial and industrial (C&I) loans starts in 1990 at about 5 percent, edges up to about 6 percent in 1991, and then declines smoothly to about 2 percent in 1994. It remains around 2 percent or a little less through early 2000 but begins to rise in mid-2000, reaching about 4 percent in 2002. The rate declines between 2003 and early 2007, to about 1.2 percent, and then ticks up slightly over the second half of 2007. In the bottom panel, the net charge-off rate on commercial real estate loans starts in 1991 and fluctuates between about 1.8 percent and 2.5 percent until year-end 1992; it then shrinks steadily to about zero percent in 1996 and remains near zero until 2000. It rises slightly in 2001 and registers about 0.2 percent in 2002 before declining again to nearly zero percent by the end of 2005. It then increases some in 2006 and climbs to about 0.4 percent by the fourth quarter of 2007. The net charge-off rate on C&I loans starts in 1990 at about 1.3 percent, rises to about 2 percent by year-end 1991, and falls generally to about 0.2 percent in late 1994, where it roughly stays until late 1997. It trends up between 1998 and mid-2001, then jumps to about 2 percent in late 2001, and remains above 1.5 percent until early 2003. It generally falls to about 0.25 percent in late 2005 and early 2006 and then rises steadily to about 0.7 percent in the fourth quarter of 2007.
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 30 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 (see table 1, note 2).