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Director's Corner

San Francisco Region Director's College Computer- Based Training
Earnings

Rating Earnings
Answer to the Rating Earnings Component of the Training Module:

Examiners rated earnings a "3". After adjusting for an inadequate Allowance for Loan and Lease Losses, ROA declined significantly from 1.39% to 0.87% in only one year. This ratio is substantially lower than peer and weaknesses in credit underwriting and administration suggest that future earnings will suffer further. This rating also considers that capital is currently less than satisfactory (which you will find out when reviewing the Capital module) and takes into account the bank's elevated risk profile, which places greater demands on earnings to restore capital to a satisfactory level.

Now let's move on to the asset quality module.

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Last Updated 06/29/2005 Supervision@fdic.gov