What is a bank's efficiency ratio?
The efficiency ratio shows how much of a bank's revenue goes on its running costs. Revenue here is net interest income plus noninterest income. The costs are noninterest expense, such as pay and premises.[S1][S2] The FDIC describes it as the share of net operating revenue taken up by overhead costs.[S1]
How is the efficiency ratio worked out?
Efficiency ratio = noninterest expense ÷ (net interest income + noninterest income) × 100. Cityfort's bank pages use this formula.
The FDIC's own figure first subtracts amortization of intangible assets from noninterest expense.[S1] A bank may also show its own adjusted version. If it removes amounts from the GAAP figures, SEC rules treat it as a non-GAAP measure.[S3] So figures are not always like for like.
Where do you find it in a 10-K or 10-Q?
The parts sit on the income statement: 10-K Item 8, or 10-Q Part I, Item 1.[S4][S5] SEC rules for banks list net interest income as its own line. They call the other two lines "other income" and "other expenses".[S2][S6] The FDIC calls them noninterest income and noninterest expense.[S1]
The ratio itself is not one of the income statement lines.[S2]