Understanding Financial Statements

Financial statements show key indicators of profitability and risk associated with the various aspects of an opportunity. You can access Financial Statements by clicking the "Financial Statements" tab on the upper right corner of the Opportunity Screen. The financial statements under the Opportunity Details section applies to opportunities. The Relationship Details section applies to clients with Relationship Awareness.

 

In this Article

 

financialstatements.jpg

 

Overview

Opportunity Details

financialstatements2.jpg

Loans Deposits Other Total
Contains information about new loans being priced in the opportunity. If an opportunity has multiple loans, click the chevrons to the left of "Loans" to expand the specific financial data for each individual loan. When there are multiple loans priced in an opportunity with varying maturities, this column will also reflect the profitability as a result of scenario weight.

 

Relationship Details 

For clients with Relationship Awareness, the "Financial Statements" tab includes a roll-up of data from the accounts that are part of the Relationship that you attach to the opportunity. A “Relationship Details” section is shown to the right of "Opportunity Details" on the Financial Statements.

You can choose the Relationship Profitability Calculation by selecting either Strategic Value or FTP Value from the dropdown menu. For more information about Strategic and FTP (or Funds Transfer) Value, see Understanding Relationship Impact.

financialstatements3.jpg

If We Lose Current If We Win
The "If We Lose" column represents the rolled-up values of accounts in the Relationship if you were to lose the opportunity that you're pricing, as well as any accounts you have marked as "At Risk," to a competitor.

 

General Information

All figures on the financial statement are annualized over the term of the loan, with the exception of funding and commitment figures, which reflect the values based on the day the loan funds and deposit begins.

For the financial statement areas described below, hovering over the amount on each line item except for the capital and funding sections will display the following values:

  • Percent of Interest Income
  • Percent of Average Balance
  • Percent of Average Equity

 

Financial Statement Line Items

Click the Info icon (Shows the information icon) to view the values used to calculate Interest Income, Interest Expense, Non-Interest Expense, and Other income.

 

financialstatements4.jpg

Interest Income

Loans

Calculation: Raw Interest Income (COF) + Origination Fees + Origination Expenses + Cap/Floor Impact (if applicable) + Tax Exempt Impact (if applicable) + Offset Account Impact (if applicable)

Please note that due to the Financial Statement being annualized:

  • If your maturity is less than one year, your origination expenses may appear higher in the Financial Statements than in the Origination Channel Field.
    • Annualized Value = Origination Expense*(12 months / # months maturity)
  • If your maturity is greater than one year, your origination fees may appear lower in the financial Statements than in the Fees field.
Deposits

Calculation: (1 - [Float & Reserves]) x Average Balance x Funding Curve Transfer Rate*

The "Funding Curve Transfer Rate" is the rate associated with the transfer duration month on your funding curve. For non-maturity deposits, this is a part of the Product definition for Transfer Duration. For Timed Deposits, this is set by the Term of the Timed Deposit.

Interest Expense 

Loans

Calculation: Raw Interest Expense + Funded Liquidity Premium + Unfunded Liquidity Premium.

  • The Funded Liquidity Premium is the cost associated with any liquidity adjustments.
  • The Unfunded Liquidity Premium is the cost associated with being committed to the full amount of a line of credit that isn't fully drawn. This is set at the regional level and is a function of either
    • the unfunded portion of the loan x the liquidity factor x the transfer duration point on the funding curve, OR
    • the unfunded portion of the loan x the Unused Line Cost Rate
    • To view the liquidity assumptions directly in the opportunity, select 'Assumptions' in the top right-hand corner of the screen, and in the subsequent pop-up, select the 'General' tab.

This is the cost of funds. To verify the Cost of Funds as a percentage, hover the mouse over the "Interest Expense" number until you see a popup. The "Percent of Average Balance" is the Cost of Funds used by PrecisionLender. In the Financial Statements under Advanced Analytics, this field is called "COF for Liabilities".

Deposits

Calculation: Average Balance * Interest Rate

Net Interest Income

Calculation: Interest Income - Interest Expense

To see the Net Interest Margin (NIM), hover over the dollar amount for Net Interest Income. In the pop up window that appears, Net Interest Margin will equal the "Percent of Average Balance" value.

 

Shows the pretax income portion of the financial statement

Earnings on Capital 

This line item indicates positive income and will only appear if Earnings on Capital have been applied at the region level.

Non-Interest Expense

Revenue generating income sources contained in Non-Interest Expense are displayed as negative expenses with parenthesis to indicate positive income.

Loans

Calculation: Annual Servicing Expense + Guarantee Expense + Participation Expense + Annual Fees + Unused Line of Credit (LOC) Fees

Deposits

Calculation: -[Annual Fees + (Annual Fees % * Average Balance)] + [Annual Operating Expenses + (Annual Operating Expenses % * Average Balance)]

The values for Annual Fee Income and Annual Operating Expense can be found in the Assumptions Screen on the deposits tab.

Loan Loss Reserves

The total loan loss provision of the loan. If you have Advanced Analytics enabled, you will be able to see the Loan Loss Provision for each month of the loan in the "Amortization" section.

Other Income 

This item only applies to the "Other" column. It will always be $0 for Loans & Deposits.

Calculation: Gross Other Revenue + Net Revenue - Servicing Expense

Pretax Income 

Calculation: Net Interest Income - Non-Interest Expense - Loan Loss Reserves + Other Income

 

Shows the net income portion of the financial statement

Taxes 

Calculated when Federal and State tax rates (set at the Region Level) are applied to the annualized "Pretax Income".

Net Income

Calculation: Pretax Income - Taxes

 

Shows the average balance and average equity on the financial statement

Average Balance

The average balance of loan or deposit.

Average Equity 

The amount of risk-based capital allocated to the loan. Both Average Regulatory Capital and Average Economic Capital are used to calculate this amount. The calculation chooses the higher of the two averages and then averages those figures.

Economic capital is higher earlier on in an amortizing loan, but drops off pretty quickly while regulatory capital stays pretty high throughout whole amortization.

 

Shows the average regulatory and economic capital on the financial statement

Avg (Average) Regulatory Capital

Calculated using the greater of the "Minimum Capital Level" based on a product's Risk Ratings or at the overall Product level.

Avg (Average) Economic Capital

Loans

Calculated using the "Credit Capital" in the Risk Ratings at the Product level against net exposure and the net recovery rate of the collateral.

Deposits and Other Income
Calculated using the Operational & Market Risk Capital Allocation at the Product Level.

Hovering over Avg Regulatory Capital and Avg Economic Capital in the loans column will display the following values:

  • Net Income
  • Percent of Average Balance
  • Return on Regulatory Capital/Return on Economic Capital

 

Shows funding and commitment on the financial statement

Gross Funding

Total amount that will be disbursed at closing. For loans with a draw schedule, this will reflect the initial draw amount if there is a draw in month 1.

Loan Net Funding 

Total balance advanced at origination minus any payoffs from previous loans from this relationship (if present). If a Line of Credit, the "Initial Balance" is also factored into this amount. For loans with a draw schedule, this will reflect the initial draw amount if there is a draw in month 1.

Loan Net Commitment 

Total commitment of the loan, minus any previous commitments made to this relationship that are being paid off with the new loan (if present).