Net interest income (NII): Net interest income is what a bank earns on its assets less what it pays on its liabilities, in dollars.
How it is calculated
Total interest income less total interest expense, from Schedule RI. Because RI is cumulative through the year, a single quarter is the filed figure less the prior quarter’s.
Formula
Net interest income = total interest income - total interest expense
How to read it
This is the main line of the business for almost every bank in the country, typically three quarters or more of total revenue. It is a dollar figure, so it grows with the balance sheet: a bank can post rising net interest income and a falling margin in the same quarter, and plenty do.
The common mistake. Reading the filed number as one quarter. Schedule RI is year to date, so the third quarter filing already contains the first two.
Go deeper
- What is a good net interest margin for a bank?
- How to read a call report
- BankingLens pricing and what a subscription adds: percentile rank against the bank’s own FFIEC peer group, fourteen quarters of trend, and the flags an examiner reaches for first.
See also. Net interest margin, Noninterest income, Cost of funds, Yield on earning assets.
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