Professional Documents
Culture Documents
How Financial Institutions Operate: BS: How They Are SET-UP To Make $
How Financial Institutions Operate: BS: How They Are SET-UP To Make $
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1
©EQCC
This Session
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©EQCC 2
Bank Assets
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Investment securities
• Securities held to earn interest and help meet liquidity needs.
Loans
• The major asset, generate the greatest amount of income, exhibit the highest default risk and
are relatively illiquid.
Other assets
• Bank premises and equipment, interest receivable, prepaid expenses, other real estate owned
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©EQCC
BS (assets): PNC v CNB
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4
Exercise: How Bank Manages Assets
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©EQCC 5
Com. Bank Assets
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Pdf, p. 15
6
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Insurance Co. Assets
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Pdf., p. 136
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Investment Bank Assets
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Pdf., p. 132
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Bank Liabilities
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Demand deposits
• Transactions accounts that pay no interest
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Bank Liabilities (continued)
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Core versus Volatile Funds
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*UBPR includes brokered deposits less than $100,000 and maturing within 1 year in
the definition of net non-core liabilities.
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©EQCC
BS (liabs.): PNC v. CNB
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Exercise: How Bank Manages Funding
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How much debt v. equity are banks using to fund its balance sheet (i.e., assets)
©EQCC 13
Stockholders Equity
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Stockholders' equity
• Ownership interest in the bank.
• Common and preferred stock are listed at par
• Surplus account represents the amount of proceeds received by the bank in excess of par
when it issued the stock.
• Retained earnings equals accumulated net income not paid out as cash dividends
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Risk Based Capital
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Com. Bank Liabs & EQ
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Pdf, p. 15
16
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Insurance Co. Liabs & EQ
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Pdf., p. 136
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©EQCC
Investment Bank Liabs & EQ
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Pdf., p. 132
18
©EQCC
The income statement
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©EQCC 19
Income statement (interest): PNC and Community
National Bank PNC BANK, NATIONAL ASSOCIATION COMMUNITY NATIONAL BANK
Dec-03 % of Dec-04 % of Dec-03 % of Dec-04 % of
Income Statement % Cha $ 1,000 Total % Cha $ 1,000 Total % Cha $ 1,000 Total % Cha $ 1,000 Total
Interest Income:
Interest and fees on loans -17.5% 1,730,575 37.5% 8.3% 1,875,058 38.4% 0.0% 7,923 73.6% 7.5% 8,521 72.1%
Income from lease financing -20.6% 189,910 4.1% -30.1% 132,839 2.7% 0.0% 0 0.0% 0.0% 0 0.0%
Memo: Fully taxable -17.7% 1,905,782 41.3% 4.6% 1,993,668 40.8% 0.0% 7,923 73.6% 7.5% 8,521 72.1%
Tax-exempt -25.7% 14,703 0.3% -3.2% 14,229 0.3% 0.0% 0 0.0% 0.0% 0 0.0%
Estimated tax benefit -27.7% 7,347 0.2% -22.3% 5,711 0.1% 0.0% 0 0.0% 0.0% 0 0.0%
Income on Loans & Leases (TE) -17.8% 1,927,832 41.7% 4.4% 2,013,608 41.2% 0.0% 7,923 73.6% 7.5% 8,521 72.1%
Other security inc. (data prior to 12/31/00) 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0%
U.S. Treasury & Agency securities 48.2% 34,418 0.7% 221.4% 110,614 2.3% -6.2% 427 4.0% 28.3% 548 4.6%
Mortgage Backed Securities -0.7% 366,877 7.9% -8.1% 337,110 6.9% -12.6% 368 3.4% 62.8% 599 5.1%
Estimated tax benefit 1.0% 504 0.0% 565.1% 3,352 0.1% 23.5% 21 0.2% 81.0% 38 0.3%
All other securities income -15.4% 117,866 2.6% -31.2% 81,129 1.7% 28.1% 41 0.4% 80.5% 74 0.6%
Memo: Tax-Exempt Securities Income 3.7% 1,008 0.0% 728.4% 8,350 0.2% 28.1% 41 0.4% 80.5% 74 0.6%
Investment Interest Income (TE) -2.4% 519,665 11.2% 2.4% 532,205 10.9% -7.4% 857 8.0% 46.9% 1,259 10.7%
Interest on due from banks 43.8% 4,835 0.1% -24.8% 3,638 0.1% 164.3% 37 0.3% 21.6% 45 0.4%
Interest on Fed funds sold & resales -32.4% 18,682 0.4% 57.9% 29,503 0.6% -7.0% 133 1.2% -23.3% 102 0.9%
Trading account income 216.9% 805 0.0% 2455.9% 20,575 0.4% 0.0% 0 0.0% 0.0% 0 0.0%
Other interest income 127.2% 39,447 0.9% -47.2% 20,847 0.4% 0.0% 15 0.1% 13.3% 17 0.1%
Total interest income (TE) -14.2% 2,511,266 54.4% 4.3% 2,620,376 53.6% -0.6% 8,965 83.3% 10.9% 9,944 84.1%
Interest Expense:
Int on Deposits held in foreign offices -14.7% 17,335 0.4% 144.0% 42,290 0.9% 0.0% 0 0.0% 0.0% 0 0.0%
Interest on CD's over $100M -29.5% 67,714 1.5% 6.4% 72,032 1.5% -19.2% 375 3.5% 6.4% 399 3.4%
Interest on All Other Deposits: -30.5% 369,702 8.0% 1.8% 376,244 7.7% -20.5% 1,060 9.8% 3.6% 1,098 9.3%
All NOW & ATS Accounts 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0%
Money market deposit accounts 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0%
Other savings deposits 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0%
Time deposits under $100M 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0%
Total interest exp. on deposits -29.8% 454,751 9.8% 7.9% 490,566 10.0% -20.2% 1,435 13.3% 4.3% 1,497 12.7%
Interest on Fed funds purchased & resale 2.2% 13,260 0.3% 204.9% 40,432 0.8% -52.2% 11 0.1% 90.9% 21 0.2%
Interest on Trad Liab & Oth Borrowings -59.0% 26,001 0.6% 429.4% 137,637 2.8% 0.0% 0 0.0% 0.0% 0 0.0%
Interest on mortgages & leases 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0%
Interest on Sub. Notes & Debentures -17.9% 55,449 1.2% 52.1% 84,340 1.7% 0.0% 0 0.0% 0.0% 0 0.0%
Total interest expense -30.6% 549,461 11.9% 37.0% 752,975 15.4% -20.6% 1,446 13.4% 5.0% 1,518 12.8%
Net interest income (TE) -8.1% 1,961,805 42.5% -4.8% 1,867,401 38.2% 4.5% 7,519 69.8% 12.1% 8,426 71.3%
Income statement (noninterest): PNC and Community
National Bank PNC BANK, NATIONAL ASSOCIATION COMMUNITY NATIONAL BANK
Dec-03 % of Dec-04 % of Dec-03 % of Dec-04 % of
Income Statement % Cha $ 1,000 Total % Cha $ 1,000 Total % Cha $ 1,000 Total % Cha $ 1,000 Total
Noninterest Income:
Fiduciary Activities -5.4% 291,582 6.3% 1.6% 296,226 6.1% 0.0% 0 0.0% 0.0% 0 0.0%
Deposit service charges 4.8% 422,100 9.1% 2.1% 431,169 8.8% 16.7% 1,070 9.9% 30.5% 1,396 11.8%
Trading rev, venture cap., securitize inc. 61.8% 88,985 1.9% -24.4% 67,267 1.4% 0.0% 0 0.0% 0.0% 0 0.0%
Investment banking, advisory inc. 3.5% 562,482 12.2% 32.7% 746,475 15.3% 0.0% 0 0.0% 0.0% 0 0.0%
Insurance commissions & fees -74.8% (660) 0.0% -1896% 11,856 0.2% -66.7% 1 0.0% 100.0% 2 0.0%
Net servicing fees -7.9% 35,245 0.8% 45.3% 51,212 1.0% 0.0% 0 0.0% 0.0% 0 0.0%
Loan & lease net gains (losses) -13.4% 134,969 2.9% -3.0% 130,953 2.7% -100.0% 0 0.0% 0.0% 0 0.0%
Other net gains (losses) -39.1% 10,036 0.2% -88.8% 1,124 0.0% -1012.5% (73) -0.7% -75.3% (18) -0.2%
Other noninterest income 10.5% 474,040 10.3% 1.3% 479,982 9.8% -31.9% 590 5.5% -15.8% 497 4.2%
Total noninterest income 3.7% 2,018,779 43.7% 9.8% 2,216,264 45.4% -16.6% 1,588 14.7% 18.2% 1,877 15.9%
Adjusted Operating Income (TE) -2.5% 3,980,584 86.2% 2.6% 4,083,665 83.6% 0.1% 9,107 84.6% 13.1% 10,303 87.2%
Non-Interest Expenses:
Personnel expense 5.7% 1,112,208 24.1% 27.8% 1,421,341 29.1% -2.4% 4,202 39.0% 3.2% 4,335 36.7%
Occupancy expense 11.8% 352,506 7.6% -0.6% 350,550 7.2% 4.5% 1,256 11.7% 2.2% 1,284 10.9%
Goodwill impairment 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0%
Other Intangible Amortization -4.6% 4,006 0.1% 186.5% 11,476 0.2% 0.0% 11 0.1% 0.0% 11 0.1%
Other Oper Exp (Incl intangibles) 10.9% 956,533 20.7% 3.9% 994,122 20.3% -2.8% 2,064 19.2% 3.3% 2,133 18.0%
Total Noninterest Expenses 8.6% 2,425,253 52.5% 14.5% 2,777,489 56.8% -1.4% 7,533 70.0% 3.1% 7,763 65.7%
Provision: Loan & Lease Losses -39.1% 176,612 3.8% -70.8% 51,553 1.1% 42.5% 684 6.4% -12.3% 600 5.1%
Pretax Operating Income (TE) -11.5% 1,378,719 29.8% -9.0% 1,254,623 25.7% -8.9% 890 8.3% 118.0% 1,940 16.4%
Realized G/L Hld-to-Maturity Sec. 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0%
Realized G/L Avail-for-Sale Sec. 12.6% 89,786 1.9% -44.5% 49,792 1.0% 110.8% 215 2.0% -100.0% 0 0.0%
Pretax Net Operating Income (TE) -10.4% 1,468,505 31.8% -11.2% 1,304,415 26.7% 2.4% 1,105 10.3% 75.6% 1,940 16.4%
Applicable Income Taxes -13.4% 490,376 10.6% -22.1% 381,926 7.8% -2.2% 355 3.3% 80.6% 641 5.4%
Current Tax Equivalent Adjustment -26.4% 7,851 0.2% 15.4% 9,063 0.2% 23.5% 21 0.2% 81.0% 38 0.3%
Other Tax Equivalent Adjustments 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0%
Applicable Income Taxes (TE) -13.6% 498,227 10.8% -21.5% 390,989 8.0% -1.1% 376 3.5% 80.6% 679 5.7%
Net Operating Income -8.6% 970,278 21.0% -5.9% 913,426 18.7% 4.3% 729 6.8% 73.0% 1,261 10.7%
Net Extraordinary Items 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0%
Net Income -8.6% 970,278 21.0% -5.9% 913,426 18.7% 4.3% 729 6.8% 73.0% 1,261 10.7%
Cash Dividends Declared 87.5% 750,000 16.2% 6.7% 800,000 16.4% -100.0% 0 0.0% 0.0% 0 0.0%
Retained Earnings -66.7% 220,278 4.8% -48.5% 113,426 2.3% 58.8% 729 6.8% 73.0% 1,261 10.7%
Memo: Net International Income 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0%
Memo: Total operating income -6.7% 4,619,831 100.0% 5.8% 4,886,432 100.0% -2.3% 10,768 100.0% 9.8% 11,821 100.0%
Memo: Net operating income -2.5% 3,980,584 86.2% 2.6% 4,083,665 83.6% 0.1% 9,107 84.6% 13.1% 10,303 87.2% 21
Interest income
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©EQCC 22
Noninterest income
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Fiduciary activities
Deposit service charges
Trading revenue, venture cap., securitize inc.
Investment banking, advisory inc.
• Net servicing fees
©EQCC 23
Noninterest expense
…composed primarily of:
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Personnel expense:
• Salaries and fringe benefits paid to bank employees
Occupancy expense :
• Rent and depreciation on equipment and premises, and
©EQCC 24
Noninterest expense
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©EQCC 25
Return on equity (ROE = NI / TE)
… the basic measure of stockholders’ returns
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©EQCC 26
ROA is driven by the bank’s ability to:
…generate income (AU) and control expenses (ER)
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In t . E x p . N o n int . E x p . P L
ER *
TA TA TA
• Note:
• AU does not include non-operating items, e.g., associates
• ER* does not include taxes.
©EQCC 27
Asset utilization (AU = TR / TA):
… the ability to generate income.
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Interest Income / TA
• Asset yields (avg. rate earned)
Interest income asset (i) / $ amount of asset (i)
• Composition of assets (mix)
$ amount asset (i) / TA
• Volume of Earning Assets
Earning assets / TA
Noninterest income / TA
• Fees and Service Charges
• Securities Gains (Losses)
• Other income
©EQCC 28
Expense ratio (ER = Exp / TA)
… the ability to control expenses.
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Interest expense / TA
• Cost per liability (avg. rate paid)
Int. exp. liab. (j) / $ amt. liab. (j)
• Composition of liabilities
$ amt. of liab. (j) / TA
• Volume of int. bearing debt and equity
Non-interest expense / TA
• Salaries and employee benefits / TA
• Occupancy expense / TA
• Other operating expense / TA
©EQCC 29
Aggregate profitability measures
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Spread
• Spread = (Int Inc / EA) - (Int Exp / Int bear. Liab.)
Earnings base
• EB = EA / TA
Burden / TA
• (Noninterest Exp. - Noninterest Income) / TA
Efficiency ratio
• Non int. Exp. / (Net int. Inc. + Non-int. Inc.)
©EQCC 30
Financial ratios
…PNC and Community National Bank
UBPR for PNC
PNC BANK, NATIONAL ASSOCIATION COMMUNITY NATIONAL BANK
Dec-03 Dec-04 Dec-03 Dec-04
RISK RATIOS Pg # CALC BANK PG 1 CALC BANK PG 1 CALC BANK PG 4 CALC BANK PG 4
ROE: Net Income / Average total equity 11 16.90% 16.56% 14.41% 15.59% 15.26% 14.55% 5.48% 5.56% 11.56% 8.63% 8.67% 11.72%
ROA: Net Income / aTA 1 1.59% 1.59% 1.28% 1.31% 1.31% 1.31% 0.41% 0.41% 1.07% 0.63% 0.63% 1.09%
AU: Total Revenue / aTA 1 calc 7.59% 7.59% 6.45% 7.02% 7.02% 6.21% 6.10% 6.10% 6.50% 5.90% 5.91% 6.23%
ER: Total expenses (less Taxes) / aTA 1 calc 5.18% 5.17% 4.51% 5.15% 5.14% 4.23% 5.47% 5.48% 5.01% 4.93% 4.94% 4.73%
EM: aTA / Avg, Total Equity 6 calc 10.59x 10.48x 11.20x 11.59x 11.47x 10.65x 13.37x 13.76x 10.85x 13.78x 13.97x 10.67x
EB: Earning Assets / aTA 6 82.86% 82.60% 89.84% 82.85% 82.92% 90.08% 85.43% 86.74% 91.45% 86.83% 86.98% 91.76%
NIM: Net interest margin (te) 1 3.89% 3.82% 3.51% 3.32% 3.18% 3.52% 4.95% 4.80% 4.33% 4.82% 4.74% 4.36%
Spread (te) 3 calc 3.74% 3.62% 3.36% 3.15% 3.02% 3.37% 4.39% 4.25% 3.97% 4.30% 4.25% 4.04%
Efficiency Ratio 3 60.93% 60.86% 57.73% 68.01% 67.97% 57.92% 82.72% 82.75% 66.06% 75.35% 75.34% 65.99%
Burden / aTA 1 calc 0.67% 0.66% 1.12% 0.81% 0.81% 1.16% 3.37% 3.37% 2.33% 2.94% 2.94% 2.39%
Non Interest Income / Noninterest exp. 1 calc 83.24% 83.42% 62.03% 79.79% 79.70% 59.86% 21.08% 21.08% 29.18% 24.18% 24.23% 26.23%
EXPENSES:
ER*: Expense ratio (Expense components) 5.18%
0.00% 5.17% 4.51% 5.15%
0.00% 5.14% 4.23% 5.47%
0.00% 5.48% 5.01% 4.93%
0.00% 4.94% 4.73%
Total Interest expense / aTA 1 0.90% 0.90% 1.29% 1.08% 1.08% 1.20% 0.82% 0.82% 1.50% 0.76% 0.76% 1.31%
Memo: Interest expense / Avg. Earn assets
1 1.09% 1.07% 1.41% 1.34% 1.28% 1.31% 0.95% 0.92% 1.61% 0.87% 0.85% 1.41%
Noninterest Expenses / aTA 1 3.98% 3.98% 2.95% 3.99% 3.99% 2.89% 4.27% 4.27% 3.29% 3.88% 3.88% 3.24%
Personnel expense 3 1.83% 1.83% 1.37% 2.04% 2.04% 1.38% 2.38% 2.38% 1.79% 2.16% 2.16% 1.78%
Occupancy expense 3 0.58% 0.58% 0.38% 0.50% 0.50% 0.36% 0.71% 0.71% 0.48% 0.64% 0.64% 0.47%
Other Oper Exp (Incl intangibles) 3 1.57% 1.58% 1.13% 1.43% 1.44% 1.08% 1.17% 1.18% 1.00% 1.07% 1.07% 0.98%
Provision: Loan & Lease Losses / aTA 1 0.29% 0.29% 0.27% 0.07% 0.07% 0.14% 0.39% 0.39% 0.22% 0.30% 0.30% 0.18%
Income Taxes / aTA #N/A 0.82% 0.83% 0.66% 0.56% 0.57% 0.67% 0.21% 0.21% 0.42% 0.34% 0.34% 0.41%
INCOME:
AU: Asset Utilization (Income components): 7.59% 7.59% 6.45% 7.02% 7.02% 6.21% 6.10% 6.10% 6.50% 5.90% 5.91% 6.23%
Interest income / aTA 1 4.12% 4.12% 4.57% 3.77% 3.77% 4.46% 5.08% 5.08% 5.52% 4.97% 4.97% 5.37%
Memo: Avg, yield on earning assets 1 4.98% 4.89% 4.98% 4.66% 4.46% 4.88% 5.91% 5.73% 5.95% 5.69% 5.59% 5.78%
Noninterest income / aTA 1 3.32% 3.32% 1.83% 3.18% 3.18% 1.73% 0.90% 0.90% 0.96% 0.94% 0.94% 0.85%
Realized security gains (losses) / aTA 1 0.15% 0.15% 0.05% 0.07% 0.07% 0.02% 0.12% 0.12% 0.02% 0.00% 0.00% 0.01%
Interest expense
…composition, rate and volume effects for
PNC and Community National Bank
PNC BANK, NATIONAL ASSOCIATION COMMUNITY NATIONAL BANK
Dec-03 Dec-04 Dec-03 Dec-04
RISK RATIOS Pg # CALC BANK PG 1 CALC BANK PG 1 CALC BANK PG 4 CALC BANK PG 4
Interest Expense: Composition, Rate and Volume Effects
Rate: Avg, interest cost of interest bearing liabilities
3 1.24% 1.27% 1.62% 1.50% 1.44% 1.51% 1.51% 1.48% 1.98% 1.39% 1.34% 1.74%
Memo: Interest expense / Earning assets 1 1.09% 1.07% 1.41% 1.34% 1.28% 1.31% 0.95% 0.92% 1.61% 0.87% 0.85% 1.41%
Volume: All Interest bearing debt (avg.) / aTA 1 72.73% 70.78% 80.81% 73.70% 74.97% 80.65% 53.76% 55.17% 75.51% 54.29% 56.69% 74.88%
Mix and Cost of Individual Liabilities:*
Total deposits (avg.) / aTA: 6 73.72% 73.84% 67.79% 72.45% 72.30% 68.32% 91.72% 91.94% 85.07% 92.02% 91.96% 84.46%
Cost (rate): Int bearing Total deposits 3 1.20% 1.22% 1.39% 1.18% 1.14% 1.25% 1.52% 1.49% 1.90% 1.38% 1.33% 1.66%
Core deposits (avg.) / aTA 6 67.41% 68.16% 53.90% 64.84% 64.29% 54.64% 84.26% 84.50% 72.07% 85.00% 84.90% 71.52%
All other deposits (avg.) / aTA 6-calc 55.93% 55.41% 42.13% 53.38% 53.19% 43.03% 45.73% 45.52% 54.88% 46.77% 47.73% 53.88%
Trans (NOW&ATS) Accts (avg.) / aTA 6 2.40% 2.23% 1.81% 2.35% 2.15% 1.92% 6.55% 6.58% 10.37% 7.43% 7.02% 10.60%
Cost (rate): Trans (NOW&ATS) Acts 3 #N/A 0.90% 0.60% #N/A 0.86% 0.62% #N/A 0.29% 0.63% #N/A 0.28% 0.59%
MMDA's and other sav. Accts (avg) / aTA 6-calc 42.29% 42.15% 30.73% 41.23% 41.28% 32.75% 25.67% 25.71% 22.70% 28.07% 29.57% 22.85%
Cost (rate): Other savs deposits* 3 #N/A 0.57% 0.70% #N/A 0.60% 0.69% #N/A 0.90% 1.08% #N/A 0.98% 1.00%
Time deposits under $100M (avg.) / aTA 6 11.24% 11.03% 9.59% 9.80% 9.76% 8.36% 13.51% 13.23% 21.81% 11.27% 11.14% 20.43%
Cost (rate): All oth time dep. (CD<100M) 3 #N/A 3.12% 2.41% #N/A 2.78% 2.03% #N/A 2.51% 2.80% #N/A 2.01% 2.43%
Volatile (S.T non core) liab (avg.) / aTA 10 9.85% 11.47% 23.24% 13.08% 12.11% 23.42% 8.03% 4.10% 11.90% 7.52% 4.84% 12.21%
Large CDs (inc. brokered) (avg.) / aTA 6 3.23% 3.14% 9.02% 3.67% 3.76% 8.99% 7.46% 7.44% 12.41% 7.02% 7.06% 12.39%
Cost (rate): CD's over $100M 3 3.44% 3.66% 2.38% 2.89% 2.81% 2.17% 2.83% 2.79% 2.72% 2.82% 2.78% 2.40%
Fed funds purchased & resale (avg.)/ aTA 6 0.74% 0.99% 8.16% 1.55% 3.18% 8.00% 0.56% 0.55% 1.05% 0.50% 0.55% 1.07%
Cost (rate): Fed funds pur & resale 3 2.95% 1.10% 1.15% 3.84% 1.37% 1.41% 1.10% 1.10% 0.82% 2.10% 1.75% 0.98%
Memo: All brokered deposits (avg.) / aTA 6 2.36% 2.19% 2.29% 2.81% 3.00% 2.81% 0.00% 0.00% 0.51% 0.00% 0.11% 0.84%
All common and preferred capital (avg.) / aTA 6 9.44% 9.54% 8.93% 8.63% 8.72% 9.39% 7.48% 7.27% 9.22% 7.26% 7.16% 9.37%
©EQCC 32
Interest income
…composition, rate and volume effects for
PNC and Community National Bank
©EQCC 33
Average Performance Characteristics of Banks by
Business Concentration and Size
Partner in Building Corporate & Personal EQuity
EQuity Consulting
ROE and ROA (up to $10 billion in assets) increases with bank size
Employees per dollar of assets decreases with bank size
Larger banks have lower efficiency ratios than smaller banks
Smaller banks:
• have proportionately more core deposits and fewer volatile liabilities than larger banks
• have a proportionately larger earnings base than larger banks
• have proportionately lower charge-offs than larger banks
©EQCC 34
Bank Performance Measure by Size
Partner in Building Corporate & Personal EQuity
EQuity Consulting
All
$100M - $1B - Trend Commercial
Assets Size < $100M $1B $10B > $10B with Size Banks
Number of institutions reporting 3,655 3,530 360 85 7,630
% of unprofitable institutions 9.80 2.00 1.90 1.20 5.70
% of institutions with earn gains 59.30 70.70 71.90 68.20 then 65.30
Performance ratios (%)
Return on equity 8.46 12.88 13.48 14.24 generally 13.82
Return on assets 0.99 1.28 1.46 1.30 then 1.31
Pretax ROA 1.24 1.73 2.21 1.93 then 1.92
Equity capital ratio 11.52 10.00 10.90 9.95 10.10
Net interest margin 4.18 4.22 4.00 3.43 3.61
Yield on earning assets 5.65 5.73 5.39 4.83 5.02
Cost of funding earn assets 1.47 1.51 1.39 1.40 1.41
Earning assets to total assets 91.86 91.93 91.01 84.39 86.18
Efficiency ratio 69.54 62.22 55.54 57.42 57.96
Burden ratio 2.60 2.07 1.21 0.82 1.06
Noninterest inc to earn assets 1.03 1.54 2.46 2.93 2.66
Noninterest exp to earn assets 3.63 3.61 3.67 3.75 3.72
Net charge-offs to LN&LS 0.27 0.31 0.43 0.73 0.63
LN&LS loss provision to assets 0.22 0.26 0.34 0.34 0.33
©EQCC 35