Bank Analysis School Case Study

Sunny State Bank

EARNINGS - NONINTEREST INCOME

% Avg. Assets

Noninterest Income/Average Assets

0.72%

0.70%

0.68%

0.64%

0.60%

Metrics

0.60%

Bank State All Banks

0.56%

0.53%

0.52%

0.50%

0.48%

0.46%

0.46%

20X0 Q4

20X1 Q4

20X2 Q4

20X3 Q4

20X4 Q4

20X5 Q4

Amounts

Noninterest Income Amounts

Year

20X1

20X2

20X3

20X4

20X5

240K

200K

160K

Metrics

Other Inv. Advisory/Insurance/Trust Deposit Service Charges Mortgage Banking

120K

80K

40K

0

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

20X5 Q3

20X5 Q4

Noninterest income is largely of a fee nature and may include: deposit service charges, mortgage banking income from selling and/or servicing residential real estate loans, trust department income, investment advisory fees, and insurance commissions. The pie chart above shows the main sources of noninterest income for the selected bank, and page 3 of the UBPR includes a more detailed breakout of amounts. "Other Noninterest Income" may include items such as debit card interchange income, increases in the value of bank-owned life insurance, and other miscellaneous income. Noninterest income is relied upon more heavily in some banks than others. The level of noninterest income will depend on if a particular bank is engaged in activities that generate these sources of income. Keep in mind that it's not uncommon for the level of noninterest income to be volatile. For example, banks may see a surge in income from secondary market loan sales when interest rates decline and homeowners refinance.