BTFG » Topics » Results of Operations

These excerpts taken from the BTFG 10-K filed Mar 23, 2009.

Results of Operations

     Net Interest Revenue

          Net interest revenue, the difference between amounts earned on interest-earning assets and the amounts paid on interest-bearing liabilities, is the most significant component of earnings for a financial institution. Major factors influencing net interest revenue are changes in interest rates, changes in the volume of assets and liabilities and changes in the asset/liability mix. Presented in Table 13 is an analysis of net interest revenue, weighted-average yields on interest-earning assets and weighted-average rates paid on interest-bearing liabilities for the past three years.

          Net yield on interest-earning assets is net interest revenue, on a tax equivalent basis, divided by total average interest-earning assets. This ratio is a measure of our effectiveness in pricing interest-earning assets and funding them with both interest-bearing and non-interest-bearing liabilities. Our net yield in 2008, on a tax equivalent basis, decreased 55 basis points to 3.40 percent compared to 3.95 percent in 2007 and 4.61 percent in 2006. From mid-2004 through mid-2006, rising interest rates and a large increase in our loan volume resulted in an increase to our net yield. This trend continued until the Federal Reserve stopped increasing rates in mid-2006. The Federal Reserve’s monetary policy, combined with slower loan growth in 2006, resulted in margin compression. In recent years certain loans were placed on non-accrual, further reducing our net interest margin. The rapid decrease in interest rates beginning in the third quarter of 2008 was a contributing factor as well. The current high volume of non-performing assets as of December 31, 2008, reduced our net interest margin by approximately 35 to 40 basis points in 2008. Further cuts in interest rates could erode our margin by limiting our ability to offset point for point asset yield reductions with liability costs. Further liability cost reductions could be limited by competition for deposits as well as the inability to aggressively lower deposit rates below the already near historic low levels in some categories.

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Results of Operations



     Net Interest Revenue



          Net interest revenue, the difference between amounts earned on interest-earning assets and the amounts paid on interest-bearing liabilities, is the most significant component of earnings for a financial institution. Major factors influencing net interest revenue are changes in interest rates, changes in the volume of assets and liabilities and changes in the asset/liability mix. Presented in Table 13 is an
analysis of net interest revenue, weighted-average yields on interest-earning assets and weighted-average rates paid on interest-bearing liabilities for the past three years.



          Net yield on interest-earning assets is net interest revenue, on a tax equivalent basis, divided by total average interest-earning assets. This ratio is a measure of our effectiveness in pricing interest-earning assets and funding them with both interest-bearing and non-interest-bearing liabilities. Our net yield in 2008, on a tax equivalent basis, decreased 55 basis points to 3.40 percent compared
to 3.95 percent in 2007 and 4.61 percent in 2006. From mid-2004 through mid-2006, rising interest rates and a large increase in our loan volume resulted in an increase to our net yield. This trend continued until the Federal Reserve stopped increasing rates in mid-2006. The Federal Reserve’s monetary policy, combined with slower loan growth in 2006, resulted in margin compression. In recent years certain loans were placed on non-accrual, further reducing our net interest
margin. The rapid decrease in interest rates beginning in the third quarter of 2008 was a contributing factor as well. The current high volume of non-performing assets as of December 31, 2008, reduced our net interest margin by approximately 35 to 40 basis points in 2008. Further cuts in interest rates could erode our margin by limiting our ability to offset point for point asset yield reductions with liability costs. Further liability cost reductions could be limited by competition for
deposits as well as the inability to aggressively lower deposit rates below the already near historic low levels in some categories.



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These excerpts taken from the BTFG 10-K filed Mar 17, 2008.
Results of Operations
 
Net Interest Revenue
 
Net interest revenue, the difference between amounts earned on interest-earning assets and the amounts paid on interest-bearing liabilities, is the most significant component of earnings for a financial institution. Major factors influencing net interest revenue are changes in interest rates, changes in the volume of assets and liabilities and changes in the asset/liability mix. Presented in Table 13 is an analysis of net interest revenue, weighted-average yields on interest-earning assets and weighted-average rates paid on interest- bearing liabilities for the past three years.
 
Net yield on interest-earning assets is net interest revenue, on a tax equivalent basis, divided by total average interest-earning assets. This ratio is a measure of our effectiveness in pricing interest-earning assets and funding them with both interest-bearing and non-interest-bearing liabilities. Our net yield in 2007, on a tax equivalent basis, decreased 66 basis points to 3.95 percent compared to 4.61 percent in 2006. From mid-2004 through mid-2006, rising interest rates and a large increase in our loan volume resulted in an increase to our net yield. This trend continued until the Federal Reserve stopped increasing rates in mid-2006. The Federal Reserve’s monetary policy, combined with slower loan growth in 2006, resulted in margin compression. In 2006 and 2007 several loans were placed on non-accrual, adding to the reduced net interest margin in 2007. Our liquidity position improved in the latter part of 2006, and in 2007 we became less aggressive in pricing deposits. This proved to be a prudent decision as loan demand decreased, and we experienced a more stable net interest margin.
 
From August of 2007 and into early 2008 the Federal Reserve has reduced rates 225 basis points, and our net interest margin has remained stable during this time. Further cuts could erode our margin by limiting our ability to offset point for point asset yield reductions with liability costs. Liability cost reductions could be restrained by competition for deposits as well as the inability to aggressively lower deposit rates below the already low levels in some categories.


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Table of Contents

Results
of Operations



 




Net
Interest Revenue



 



Net interest revenue, the difference between amounts earned on
interest-earning assets and the amounts paid on interest-bearing
liabilities, is the most significant component of earnings for a
financial institution. Major factors influencing net interest
revenue are changes in interest rates, changes in the volume of
assets and liabilities and changes in the asset/liability mix.
Presented in Table 13 is an analysis of net interest revenue,
weighted-average yields on interest-earning assets and
weighted-average rates paid on interest- bearing liabilities for
the past three years.


 



Net yield on interest-earning assets is net interest revenue, on
a tax equivalent basis, divided by total average
interest-earning assets. This ratio is a measure of our
effectiveness in pricing interest-earning assets and funding
them with both interest-bearing and non-interest-bearing
liabilities. Our net yield in 2007, on a tax equivalent basis,
decreased 66 basis points to 3.95 percent compared to
4.61 percent in 2006. From mid-2004 through mid-2006,
rising interest rates and a large increase in our loan volume
resulted in an increase to our net yield. This trend continued
until the Federal Reserve stopped increasing rates in mid-2006.
The Federal Reserve’s monetary policy, combined with slower
loan growth in 2006, resulted in margin compression. In 2006 and
2007 several loans were placed on non-accrual, adding to the
reduced net interest margin in 2007. Our liquidity position
improved in the latter part of 2006, and in 2007 we became less
aggressive in pricing deposits. This proved to be a prudent
decision as loan demand decreased, and we experienced a more
stable net interest margin.


 



From August of 2007 and into early 2008 the Federal Reserve has
reduced rates 225 basis points, and our net interest margin
has remained stable during this time. Further cuts could erode
our margin by limiting our ability to offset point for point
asset yield reductions with liability costs. Liability cost
reductions could be restrained by competition for deposits as
well as the inability to aggressively lower deposit rates below
the already low levels in some categories.





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Table of Contents







This excerpt taken from the BTFG 10-K filed Mar 15, 2007.

Results of Operations

Net Interest Revenue

Net interest revenue, the difference between amounts earned on interest-earning assets and the amounts paid on interest-bearing liabilities, is the most significant component of earnings for a financial institution. Changes in interest rates, changes in the volume of assets and liabilities and changes in the asset/liability mix are the major factors that influence net interest revenue. Presented in Table 12 is an analysis of net interest revenue, weighted-average yields on interest-earning assets and weighted-average rates paid on interest- bearing liabilities for the past three years.

Net yield on interest-earning assets is net interest revenue, on a tax equivalent basis, divided by total interest-earning assets. This ratio is a measure of our effectiveness in pricing interest-earning assets and funding them with both interest-bearing and non-interest-bearing liabilities. Our net yield in 2006, on a tax equivalent basis, decreased 19 basis points to 4.61 percent compared to 4.80 percent in 2005. After a period of stable rates in 2003, interest rates began to rise in mid-2004, and net yield also began to increase. Added to the positive effect of rising rates of interest on our net interest margin was a large increase in our loan volume. This trend continued until The Federal Reserve stopped increasing rates in mid-2006. The Federal Reserve’s monetary policy, combined with slower loan growth in 2006, resulted in margin compression. In 2006 several loans were placed on non-accrual, and this added to the reduced net interest margin. Our liquidity position improved in 2006, and, if our liquidity continues to improve or remains stable in 2007, we may be less aggressive in pricing deposits, resulting in a more stable net interest margin.

 

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Table of Contents
This excerpt taken from the BTFG 10-K filed Mar 15, 2006.

Results of Operations

Net Interest Revenue

Net interest revenue, the difference between amounts earned on assets and the amounts paid on interest-bearing liabilities, is the most significant component of earnings for a financial institution. Changes in interest rates, changes in the volume of assets and liabilities, and changes in the asset/liability mix are the major factors that influence net interest revenue. Presented in Table 12 is an analysis of net interest revenue, weighted-average yields on interest-earning assets and weighted-average rates paid on interest- bearing liabilities for the past three years.

Net yield on interest-earning assets is net interest revenue, on a tax equivalent basis, divided by total interest-earning assets. This ratio is a measure of our effectiveness in pricing interest-earning assets and funding them with both interest-bearing and non-interest-bearing liabilities. Our net yield in 2005, on a tax equivalent basis, increased 33 basis points to 4.80 percent compared to 4.47 percent in 2004. After a rapid decline that began in 2001, interest rates stabilized in 2003, as did our net yield on interest-earning assets. As market interest rates began to rise in mid-2004, our net yield also began to increase. Added to the positive effect of rising rates of interest on our net interest margin was a large increase in our loan volume. This trend continued through 2005. Many economists believe that the Federal Reserve will stop increasing rates at some point during 2006. If this happens, and loan growth is slower in 2006 than in the past several years, our margins may compress somewhat. If our loan originations increase and begin to outpace our deposit growth in 2006, we may be required to more aggressively price deposits in order to avoid even greater dependence on brokered deposits and borrowings to fund loans. Increasing the interest rates we pay on deposits could also have a negative effect on our net interest margin.

 

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