Bank Analysis School Case Study

Sunny State Bank

EARNINGS - NET INTEREST MARGIN

Date Range (all ratios on page)

20X1 Q4 - 20X5 Q4

Net Interest Margin

4.24%

4.21%

4.20%

4.10%

3.97%

3.96%

4.00%

3.93%

Metrics

Bank State All Banks

3.80%

3.85%

3.71%

3.70%

3.64%

3.75%

3.73%

3.57% 3.58%

3.60%

3.57%

3.60%

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

20X5 Q3

20X5 Q4

Yield on Assets

Cost of Funds

4.80%

0.40% 0.45% 0.50% 0.55% 0.60% 0.65% 0.70%

4.73%

4.64%

4.60%

4.53%

0.55%

4.41%

0.53%

4.40%

4.38%

4.35%

4.28%

0.52%

0.53%

4.23%

0.48%

0.46%

4.20%

0.44%

4.18%

0.43%

0.43%

4.10%

0.42%

4.18%

4.16%

4.15%

0.44%

0.44%

4.05%

0.43%

0.42%

0.42%

4.00%

0.40%

3.99%

20X1 Q4 20X5 Q4 • 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 profitability 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 specific 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. 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 20X5 Q3 20X5 Q4 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 20X5 Q3

Made with FlippingBook Digital Proposal Maker