Possibly marking an adverse trend, commercial bank earnings fell 1%, to $14.9 billion in the fourth quarter, the Federal Deposit Insurance Corp. said Monday .

It was the second consecutive quarterly decline after seven quarters of increases. Fourth-quarter results were 2.5% below the same period of 1997.

The percentage of banks reporting full-year losses rose for the third straight year. In 1998, 5.8% of commercial banks reported a net loss, compared with 4.9% in 1997. "This is the highest proportion of unprofitable banks since 1992, when 6.9% lost money," according to the FDIC's "Quarterly Banking Profile."

However, 1998 earnings still topped $60 billion for the first time. At $61.9 billion, last year's profits rose 4.7% and scored a seventh consecutive annual record.

The FDIC attributed the fourth quarter's falloff to corporate restructuring costs. Noninterest expenses in the last three months of the year hit $7.5 billion, up 15.7% from the third quarter and 23.6% above the year-earlier period.

For the full year, noninterest expense jumped 14.2%, to $194 billion.

Profits got a boost in the fourth quarter from securities sales and a reduction in loan-loss reserves, which fell 17%, to $5.5 billion. But for the full year, loan-loss provisions grew 4.7%, to $57.3 billion.

The FDIC report warned: "Asset quality showed signs of weakening in 1998."

Noncurrent loans rose 9.5% last year-the first annual increase since 1990-to $31.3 billion. "The rise in noncurrent loans occurred despite higher loan chargeoffs," the FDIC noted. Banks charged off $20.7 billion of loans in 1998, up 13% over 1997.

Asset growth last year held the percentage of loans noncurrent steady at 0.96%, which is still near record lows, the FDIC said.

Assets grew 8.5%, to $5.44 trillion in 1998, not as fast as the previous year, but still strong. Commercial and industrial loans grew 12.9%, to $898.8 billion, while real estate lending was up 8.2%, to $1.35 trillion. Loans to individuals grew 1.7%, to $571 billion.

The average net interest margin fell to 4.09% in the fourth quarter, the lowest since mid-1991, according to the FDIC. "For all of 1998, commercial bank net interest margins declined by 14 basis points," the agency noted, adding it was "the sharpest year-to-year decline since 1974-75, when it fell by 30 basis points."

Net interest income increased 4.7% last year, to $182.8 billion. Offsetting the squeeze on spreads, noninterest income jumped 18.4% last year, to $123.7 billion. Gains on securities sales increased nearly 70%, to $3.13 billion last year.

Also adding to 1998 earnings was the first year-to-year reduction in dividends since 1991-92. Last year cash dividends fell 3.4%, to $41 billion.

At Dec. 31 there were 8,774 insured commercial banks, a decrease of 368. During 1998, 557 banks were absorbed by mergers, 190 new banks were chartered, three banks failed, and two uninsured institutions got insurance.

The FDIC's list of "problem" banks ended 1998 roughly where it started, with 69 institutions holding $5.4 billion of assets.

Like commercial banks, thrift profits were down in the fourth quarter, with earnings falling 31%, to $2 billion. Declines in noninterest income accounted for virtually all of the decline.

Despite the tough quarter, however, thrift earnings jumped 16%, to a record $10.2 billion in 1998, pushing return on assets above 1% for the first time since 1946.

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