June 4, 2007


  • Thank you for your comment. We appreciate the feedback. The main reason that the ROA calculation does not seem to add up is that ROA for banks is calculated after income taxes are taken out. For banks this quarter, income taxes were 0.56% of average total assets. Credit unions differ in this respect as they are non-profit institutions and do not pay income taxes on interest income. Also, net interest margin is calculated by the FDIC using average earning assets, where as the other components are calculated using average total assets, including ROA.
    Mike Werstuik (Author)
  • The bank percentages in the business model chart don''t make any sense. Margin plus non-interest income, less provision and expenses, should equal ROA.