Income Statement Basics
This is the “bottom line” of the income statement.
What is Net Income?
Net interest income tends to be more important for these types of banks.
What are small banks?
This bank profitability measure is calculated as net interest income minus burden and provision for losses, plus securities gains, minus taxes.
What is Net Interest Income?
This equals total assets minus total liabilities.
What is Equity?
These are bank obligations that require the payment of interest, such as deposits and borrowed funds.
What are Interest-Bearing Liabilities?
This income statement item represents money earned from normal business operations.
What is Revenue?
This is the cost a bank pays on deposits and borrowed funds.
What is Interest Expense?
In the ROE model, this equals noninterest expense minus noninterest income divided by assets.
What is Burden?
This equals gross profit minus operating expenses.
What is Operating Income?
This refers to the mix of a bank’s funding sources, such as deposits, short-term borrowing, and long-term debt.
What is Liability Composition?
These are costs incurred to generate revenue during a period.
What are Expenses?
This type of income comes from fees and services rather than lending activity.
What is Non-interest Income?
In the ROE model, this equals income divided by assets
What is Asset Utilization?
This equals revenue minus all expenses, including taxes and interest.
What is Net Income?
This refers to the distribution of a bank’s liabilities between short-term and long-term borrowing.
What is Maturity?
This profit measure equals revenue minus cost of goods sold.
What is Gross Profit?
This expense reflects money set aside to cover expected loan defaults.
What is Provision for Loan Losses?
In the ROE model, this equals the assets divided by equity
What is Equity Multiplier?
This banking profitability measure equals net interest income divided by earning assets.
What is Net Interest Margin?
This refers to when a bank chooses to raise funds in order to match lending demand or interest rate conditions.
What is Timing of Borrowing?
This profitability measure is calculated before interest and taxes are deducted.
What is Operating Income?
This represents accumulated profits that are kept in the bank rather than paid out as dividends.
What are Retained Earnings?
In the ROE model, this equals noninterest expense divided by net interest income plus noninterest income
What is Efficiency Ratio?
This income statement measure equals revenue minus operating expenses, excluding interest and taxes.
What is Earnings Before Interest and Taxes?
This measures how much a bank uses borrowed funds relative to its equity to finance its assets.
What is Leverage?