Interest Income II Includes interest and fees from Loans Deposits at other

Interest income ii includes interest and fees from

This preview shows page 30 - 43 out of 84 pages.

Interest Income (II) Includes interest and fees from: Loans Deposits at other institutions Trading Account Securities Municipal Securities Estimated Tax Benefit = Municipal Interest Rate/(1 – Marginal Tax Rate) = Tax-Equivalent Municipal Interest Income 30
Image of page 30
Commercial Bank Financial  Statements Income Statement Interest Expense (IE) Includes interest paid on all interest- bearing liabilities: NOW Accounts ATS Accounts MMDAs Savings Accounts Time Deposits Non-Core Liabilities Long-Term Debt 31
Image of page 31
Commercial Bank Financial  Statements Income Statement Interest Income (II) minus Interest Expense (IE) equals Net Interest Income (NII) 32
Image of page 32
Commercial Bank Financial  Statements Income Statement Non-Interest Income (OI) Includes: Fiduciary (Trust) Income Deposit Service Charges Trading Revenues Investment Banking Fees and Commissions Insurance Commission Fees and Income Net Servicing Fees Net Gains (Losses) on Sales of Loans Other Net Gains (Losses) 33
Image of page 33
Commercial Bank Financial  Statements Income Statement Non-Interest Expense (OE) Includes: Personnel Occupancy Technology Utilities Deposit Insurance Premiums Intangible Amortizations Goodwill Impairment 34
Image of page 34
Commercial Bank Financial  Statements Income Statement Non-Interest Expense (OE) minus Non-Interest Income (OI) equals Burden Non-interest expense is typically larger than non-interest income Reducing the Burden will increase bank profitability 35
Image of page 35
Commercial Bank Financial  Statements Income Statement Provision for Loan and Lease Losses (PLL) Estimate of potential losses on loans Relationship between PLL and ALL Beginning ALL (from Balance Sheet) plus This year’s PLL (from Income Statement) minus Charge-offs plus Recoveries Equals Ending ALL 36
Image of page 36
Commercial Bank Financial  Statements Income Statement Provision for Loan and Lease Losses (PLL) Relationship between PLL and ALL Recall, ALL is a contra-asset account When a loan is charged off, Gross Loans and the ALL account are decreased by the same amount 37
Image of page 37
Commercial Bank Financial  Statements Income Statement Net Interest Income (NII) minus Burden minus PLL plus Realized Security Gains (Losses) (SG) equals 38
Image of page 38
Commercial Bank Financial  Statements Income Statement Pre-Tax Net Operating Income (te) minus Taxes (T) minus Extraordinary Items equals Net Income (NI) 39
Image of page 39
Commercial Bank Financial  Statements Income Statement Total Revenue (TR) or Total Operating Income (TOI) Includes: Interest Income Non-Interest Income Realized Security Gains (Losses) Analogous to Net Sales 40
Image of page 40
Commercial Bank Financial  Statements Income Statement Total Operating Expense (EXP) Includes Interest Expense Non-Interest Expense PLL Analogous to COGS + Operating Expenses 41
Image of page 41
Commercial Bank Financial  Statements Income Statement NI = NII – Burden – PLL + SG – T 42
Image of page 42
Image of page 43

You've reached the end of your free preview.

Want to read all 84 pages?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture