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
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