Question
How does the FDIC define quarterly measures of loan performance (charge-offs, net charge-offs, net charge-off rate, etc.)?
Answer
The five measures are as follows. (The FDIC's documentation uses the phrase "loans and leases" to be inclusive.)
- Average loans outstanding (ALO) = Balance of loans, averaged over two consecutive periods.
- Charge-off (COF) = Loans removed from balance sheet because uncollectible.
- Recoveries (REC)
- Net charge-off (NCO) = Charge-offs, less amounts recovered on loans previously charged-off.
- Net charge-off rate (COR) = Net charge-offs divided by average loans outstanding, annualized. Note that Data Buffet stores this as a literal percentage, e.g. “5.01 percent” is “5.01” not “0.00501”.
Mathematically, they are related thusly:
- ALO[T] = (Loans[T-1] + Loans[T]) / 2
- NCO = COF - REC
- COR = 4 * 100 * NCO / ALO
References
See also
Related Releases
Charge-Off and Delinquency Rates on Loans and Leases at Commercial Banks
Quarterly Banking Profile
Statistics on Depository Institutions