Bank Analysis School

Internal Use Only

Net income

Earnings Feed Capital Earnings flow into capital

- Dividends = Retained earnings (part of capital)

Capital

Internal Use Only

10 Evaluation of an institution’s lending policies, credit administration, and the quality of the loan portfolio is among the most important aspects of the examination process. To a great extent, the quality of an institution's loan portfolio determines the risk to depositors and to the FDIC's insurance fund. Conclusions regarding the institution’s condition and the quality of its management are weighted heavily by the examiner's findings with regard to lending practices. ” - FDIC Risk Management Manual