A key indicator of solvency and financial strength.
Net interest income: the difference between what a bank earns on its assets and what it pays on its liabilities
Net interest margin = Net interest income / earning assets
Noninterest income: fees for other services (eg. advisory, insurance brokerage)
Noninterest expenses: eg. wages, rent, utilities.
Net revenue: (aka total revenue) net interest income + noninterest income
Efficiency ratio = Noninterest expense / Net revenue
(Banks don't express their income in terms of profit margins. The lower efficiency ratio the better.)
Provision for loan losses: allowance for loan losses
The relative size of this figure to gross loan will convey how prepared a bank is for a deterioration in credit quality.
Loan-loss ratio: allowance for loan losses / total outstanding loans
Charge-off: bad loan amount - collateral's market value
Charge-off ratio = net charge-offs / gross loans
Low charge-off ratio suggest a bank is doing a good job in identifying creditworthy loans
Past-due loans: when borrowers falls behind schedule interest and princial payments (usually reported in footnote)
Nonperforming assets: total value of loans the bank seriously doubts it will be able to collect in full.
(This is not a projection of future losses as loans may be secured with collateral but the more nonperforming assets a bank has, the greater the likelihood that the eventual loss will be higher than what has already been charged off.)
Source: "The Ultimate Dividend Playbook" by Josh Peters
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