RATIO ANALYSIS OF BANKS REVIEW FIVE TYPES OF RATIOS1. RETURN OR PROFITABILITY 2. OPERATING EFFICIENCY 3. TAX MANAGEMENT 4. LIQUIDITY 5.

CAPITAL ADEQUACY MEASURING RETURNS: RETURN ON ASSETS (ROA) = NET PROFIT TOTAL ASSETS RETURN ON EQUITY (ROE) = NET PROFIT COMMON EQUITY OR ROE = NET PROF X G.O.I. X TOT ASSETS GROSS OP.INC TOT ASSETS COM.EQTY

NET PROFIT MARGIN = NET PROFIT GROSS OPER INCOME NET INTEREST MARGIN = TOT INTEREST INCOME - INT EXPENSE TOTAL ASSETS OR EARNINGS ASSETS

INT INC. ON LOANS/AVG LOAN PORTFOLIO

INT INC ON SECUR./AVG SECUR PORTFOLIO

MEASURING OPERATING EFFICIENCY: TOTAL OPER EXP GROSS OPER. INC.

GROSS OPERATING INCOME/ ASSETS

TOT NON-INTEREST INCOME TOT ASSETS

TOT NON-INT INC OVERHEAD EXPENSES

AVERAGE YIELD ON ASSETS = TOTAL INTEREST INCOME TOTAL ASSETS

INTEREST EXPENSE/GROSS OPER.INC.

TOTAL INTEREST EXP TOTAL ASSETS

TAX MANAGEMENT MEASURES: TAX EXEMPT POSITION= INVMT IN TAX EXEMPT SEC TOT ASSETS LOAN LOSS PROV GROSS OPER INC

MEASURING LIQUIDITY: CASH & DUE FROM BANKS TOT ASSETS TOT DEMAND DEPOSITS TOTAL ASSETS

TIME DEPOSITS TOTAL ASSETS LOANS AND MORTGAGES TOTAL ASSETS

MEASURING CAPITAL ADEQUACY: CAPITAL RATIO = EQUITY CAPITAL TOTAL ASSETS

LEVERAGE RATIO = TOTAL ASSETS EQUITY CAPITAL

LOAN LOSS RES TOT LOANS & MORT.