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Understanding Financial Statements

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Financial Statements

 

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 scenario. 

 

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Note: Hovering over the amount on each line item except for the capital and funding sections will display the following values:

  • Percent of Net Income
  • Percent of Average Balance
  • Percent of Average Equity

 

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Loans - Contains information about loans 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.

Deposits - Contains information about deposits associated with an opportunity. Unlike opportunities, there is no option to breakdown the individual deposit types - the values represented are an aggregate of all deposit types associated with the opportunity. If deposit products have not been enabled by your administrator(s), this column will not be visible on the financial statement.

Other - Contains information about other accounts associated with an opportunity. Like deposits, the values represented are an aggregate of all other accounts associated with the opportunity.

All - Contains aggregated totals from the Loans, Deposits, and Other columns. 

 

Net Interest Income

(Figures annualized over the term of the loan)

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Interest Income  

  • For Loans: Click the Info icon (Information.png) to view the values used to calculate interest income.
    • Calculation: Raw Interest Income + Origination Fees + Origination Expenses + Cap/Floor Impact (if applicable) + Tax Exempt Impact (if applicable)
  • For Deposits
    • Calculation: (1 - [Float & Reserves]) x Average Balance x Funding Curve Transfer Rate*
      • *Funding Curve Transfer Rate is calculated by looking at the 'Transfer Duration' in the Assumptions of the deposit product and then finding the transfer duration on your specified default funding curve - 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 Timed Deposits, this is set by the Term of the Timed Deposit.

Interest Expense 

  • For Loans: Click the Info icon (Information.png) to view the values used to calculate interest expense.
    • Calculation: Raw Interest Expense + Funded Liquidity Premium + Unfunded Liquidity Premium.
    • 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.
    • Note that in the Financial Statements under Advanced Analytics, this field is called "COF for Liabilities".
  • For Deposits
    • Calculation: Average Balance * Interest Rate

Net Interest Income - Calculation: Interest Income - Interest Expense

 

Pretax Income

(Figures annualized over the term of the loan)

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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.
  • For Loans: Click the Info icon (Information.png) to view the values used to calculate non-interest expense. 
    • Calculation: Annual Servicing Expense + Guarantee Expense + Participation Expense + Annual Fees + Unused Line of Credit (LOC) Fees
  • For 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. Click the Info icon (Information.png) next to the amount to view the values used to calculate other income.

  • Calculation: Gross Other Revenue + Net Revenue - Servicing Expense

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

 

Net Income

(Figures annualized over the term of the loan)

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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

 

Average Balance/Equity

(Figures annualized over the term of the loan)

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

 

Average Regulatory/Economic Capital

(Figures annualized over the term of the loan)

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Avg (Average) Regulatory Capital - Calculated using the 'Minimum Capital Level' in the Risk Ratings at the Product level. 

Avg (Average) Economic Capital 

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

Note: 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
     

Funding/Commitment

(Figures represent the day the loans/deposits begin)

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Gross Funding - Total commitment of the loan at the origination of the opportunity. For loans with a draw schedule, this will reflect the initial draw amount if there is a draw in month 1. For conversion loans, the amount of the permanent portion will be reflected in the individual loan column, but not the total loan column.

Loan Net Funding - Total commitment of the loan at the origination of the opportunity 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. For conversion loans, if additional funds will be provided at the time of conversion, the additional amount will be reflected in the individual loan column, but not the total loan column.

Loan Net Commitment - Total commitment of the loan, minus any previous commitments made to this relationship (if present). 

 

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