Net Income

The year-to-date net profit or loss recorded by the institution. This figure includes the company’s operating profit (income from lending, investing, and fees less interest and overhead expenses) as well as non-operating items such as capital gains on the sale of securities, income taxes, and extraordinary items.

Net Interest Spread

The difference between the institution’s interest income and interest expense for the year (year-to-date quarterly figures are converted to a 12-month equivalent) as a percentage of its average revenue-generating assets. Since the margin between interest earned and interest paid is generally where the company generates the majority of its income, this figure provides insight into the company’s ability to effectively manage interest spreads. A low Net Interest Spread can be the result of poor loan and deposit pricing, high levels of non-accruing loans, or poor asset/liability management.

Non-Perf. Assets to Assets

Loans or leases that are more than 90 days past due, plus the real estate owned by the bank due to foreclosures as a percentage of the total assets. A large percentage of non-performing assets to assets may be detrimental to the overall financial health of the bank and call for a review of credit approval and lending practices.

Non-Perf. Loans to Capital

The percentage of past due 90 days and non-accruing loans plus a portion of all restructured loans, less government guaranteed GNMA loans and those loans protected by the FDIC to the company’s core (tier 1) capital plus reserve for loan losses. This ratio answers the question: If all of the bank’s significantly past due and non-accruing loans were to go into default, how much would that eat into capital? A large percentage of non-performing loans signal imprudent lending practices which are a direct threat to the equity of the institution.

Non-performing loans were adjusted in 2011 to include a portion of all restructured loans, less government guaranteed GNMA loans and those loans protected by the FDIC.

Non-Perf. Loans to Loans

The percentage of the institution’s loan portfolio which is either past due on its payments by 90 days or more, or no longer accruing interest due to doubtful collectability. This ratio is affected primarily by the quality of the institution’s underwriting practices and the prosperity of the local economies where it is doing business. While only a portion of these loans will actually end up in default, a high ratio here will have several negative consequences including increased loan loss provisions, increased loan collection expenses, and decreased interest revenues.

Weiss Ratings