For the banks represented in tables 2b1 and 2b3 the

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income, respectively. For the banks represented in Tables 2B–1 and 2B–3, the values of these ratios are as follows: Webster Financial Bancorp Bank of America Interest income ratio 996.72 16,755.39 5.95% 80,161.52 1,439,598.50 5.57% Noninterest income ratio 189.56 16,755.39 1.13% 33,673.20 1,439,598.50 2.34% The interest income and noninterest income ratios are not necessarily independ- ent. For example, the bank’s ability to generate loans affects both interest income and, through fees and service charges, noninterest income. High values for these 102. Fed funds and RPs 0.43 9.30 103. U.S. Treasury and agencies 9.72 11.30 104. Mortgage-backed securities 0.73 105. Municipals and other debt and equity securities 4.97 12.73 Off-Balance-Sheet Items as a Percentage of Total Assets 106. Loan commitments 29.52% 95.84% 107. Commercial letters of credit 0.11 0.40 108. Standby letters of credit 1.01 5.57 109. Loans sold 15.40 110. Derivative securities 10.74 2086.51 111. Total off-balance-sheet items 41.38 2203.72 Noninterest Income as a Percentage of Total Assets 112. Fiduciary accounts 0.06% 0.08% 113. Service charges 0.51 0.63 114. Trading gains 0.00 0.22 115. Other noninterest income 0.56 1.41 Noninterest Income as a Percentage of Total Noninterest Income 116. Fiduciary accounts 5.17% 3.47% 117. Service charges 44.94 27.06 118. Trading gains 0.42 9.22 119. Other noninterest income 49.47 60.25 TABLE 12–7 Decomposition of Asset Utilization for Two Commercial Banks for 2007 continued
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30 Appendix 2B Commercial Banks’ Financial Statements and Analysis ratios signify the efficient use of bank resources to generate income and are thus generally positive for the bank. But some problematic situations that result in high ratio values could exist; for example, a bank that replaces low-risk, low-return loans with high-risk, high-return loans will experience an increase in its interest income ratio. However, high-risk loans have a higher default probability, which could result in the ultimate loss of both interest and principal payments. Further breakdown of these ratios is therefore a valuable tool in the financial performance evaluation process. The interest income ratio can be broken down using the various components of interest income (ratios 62–71; e.g., income on C&I loans/total assets); or by using asset yields (ratios 72–81; e.g., income on C&I loans/dollar value of C&I loans); or by using size of investment (e.g., dollar value of C&I loans/total assets—ratios 82–95—or dollar value of C&I loans/total earning assets—ratios 96–105). Off-balance- sheet activities can also be measured in terms of the size of the notional values they create in relation to bank assets (ratios 106–111—e.g., loan commitments/ total assets). The noninterest income ratio can also be subdivided into the various subcategories (e.g., income from fiduciary activities/total assets—ratios 112–115— or income from fiduciary activities/noninterest income—ratios 116–119). Other Ratios A number of other profit measures are commonly used to evaluate bank perform- ance. Three of these are (1) the net interest margin, (2) the spread (ratio), and (3) overhead efficiency.
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