The UBPR is a good starting point to begin extracting asset quality information. It is a very useful tool for identifying trends or outlying performance issues relative to a group of similar banks. Examiners use the UBPR to plan for examinations by identifying areas with potential credit exposure. Nonetheless, the UPBR will only take you so far in painting a picture of asset quality. The onsite portion of the examination will build upon the UBPR analysis and so should your board reviews.

Several financial ratios relating to asset quality are available in the UBPR. These ratios provide detail on balance sheet composition, off-balance sheet commitments, delinquencies, charge-offs, and portfolio mix. We are only going to focus on four ratios in our brief exercise, but we invite you to go to www.ffiec.gov and review the significant amount of information that we have compiled on your bank. Four ratios to focus on when assessing asset quality include:

1. Asset Growth Rate - This ratio details the change in total assets over the past 12 months.



2. Non-current Loans and Leases to Gross Loans and Leases - This ratio reflects the percentage of loans that are 90 days or more past due, or are no longer accruing interest.



3. Net Losses to Average Total Loans and Leases - This ratio presents the level of net losses, on an annualized basis, as a percentage of the total portfolio. It takes into consideration any recoveries on prior period losses.



4. Loan and Lease Allowance to Total Loans - This ratio measures the allowance available to absorb loan losses relative to total loans outstanding.