Bank Analysis School Case Study eBook

Sunny State Bank

EARNINGS - NET INTEREST MARGIN ANNUALIZED

One Quarter Annualized Net Interest Margin

3.55% 3.60% 3.65% 3.70% 3.75% 3.80% 3.85% 3.90% 3.95% 4.00% 3.96%

3.97%

3.93%

(All)

20X9Q2

3.85%

20X9Q3

Metrics

20X9Q4

Bank State All Banks

3.70%

3.75%

3.71%

3.73%

20X0Q1

20X0Q2

3.60%

3.64%

3.58%

20X0Q3

3.57%

20X0Q4

20X3Q1

20X3Q2

20X3Q3

20X3Q4

20X4Q1

20X4Q2

20X4Q3

20X4Q4

20X5Q1

20X5Q2

20X5Q3

20X5Q4

20X1Q1

One Quarter Annualized Yield on Assets

One Quarter Annualized Cost of Funds

20X1Q2

4.70%

0.44% 0.48% 0.52% 0.56% 0.60% 0.64% 0.68% 0.72%

20X1Q3

4.60%

20X1Q4

4.50%

4.41%

20X2Q1

4.38%

4.40%

4.35%

0.55%

20X2Q2

4.28%

0.53%

4.30%

4.23%

0.52%

0.53%

20X2Q3

4.20%

4.15%

4.18%

0.46%

4.10%

4.18%

4.17%

0.44%

20X2Q4

4.16%

0.43%

0.43%

4.10%

0.44%

20X3Q1

4.00%

0.42%

0.42%

0.42%

0.40%

3.99%

20X3Q2

20X3Q3

20X3Q1 20X5Q4 • The Net Interest Margin (NIM) is calcluated as net interest income divided by average earnings assets. Tax-equivalent adjustments are made to enable meaningful comparisons for banks that have tax-exempt income. This ratio measures the proftability of the bank’s primary activities of obtaining funds and making loans and investing (buying and selling money). • The Yield on Assets and Cost of Funds ratios are sub-components of the NIM. The Yield on Assets is calculated as Interest Income/Average Earning Assets and Cost of Funds is calculated as Interest Expenses/Average Earning Assets. Yields and costs related to specifc asset and liability categories on Page 3 of the UBPR can be further analyzed to determine the root causes of NIM changes. These ratios may change for a variety of reasons. For example, management may have restructured the balance sheet, the interest rate environment may have changed, or bank loan and deposit pricing became more or less competitive. 20X3Q2 20X3Q3 20X3Q4 20X4Q1 20X4Q2 20X4Q3 20X4Q4 20X5Q1 20X5Q2 20X5Q3 20X5Q4 20X3Q1 20X3Q2 20X3Q3 20X3Q4 20X4Q1 20X4Q2 20X4Q3 20X4Q4 20X5Q1 20X5Q2 20X5Q3