Bank Analysis School Case Study

Sunny State Bank

LOAN LOSS HISTORY

Net Loan Losses/Average Loans

0.50%

(All)

20X0 Q4 20X1 Q1 20X1 Q2 20X1 Q3 20X1 Q4 20X2 Q1 20X2 Q2 20X2 Q3 20X2 Q4 20X3 Q1 20X3 Q2 20X3 Q3 20X3 Q4 20X4 Q1 20X4 Q2 20X4 Q3 20X4 Q4 20X5 Q1 20X5 Q2

0.40%

0.32%

0.30%

Metrics

0.30%

Bank State All Banks

0.20%

0.19%

0.18%

0.10%

0.10%

20X1 Q4

20X0 Q4

20X2 Q4

20X3 Q4

20X4 Q4

20X5 Q4

Recoveries to Prior Credit Losses

450.0%

445.5%

400.0%

300.0% 350.0%

250.0%

200.0%

100.0% 150.0%

41.6%

50.0%

6.6%

6.7%

4.1%

0.0%

20X1 Q4

20X0 Q4

20X2 Q4

20X3 Q4

20X4 Q4

20X5 Q4

• Net loan losses = gross loan losses - recoveries. Past loan losses are often a sign of poor underwriting and/or credit administration. The next page shows net loan losses for particular loan types. • Recoveries to Prior Credit Losses = loan recoveries in the current year / gross loan losses in the preceding year. A low amount of recoveries could indicate management is slow to recognize loan losses (waiting until there is very little chance of recovery before charging loans off the books).