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TitleUnderstanding Data: U.S. - FDIC loan performance measures
AuthorPhillip Thorne
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