Earnings

Earnings absorb normal and expected losses in a given period and provide a source of financial support by contributing to the institution’s internal generation of capital and its ability to access capital externally.

The following statements describe the rating categories used in assessing an institution’s earnings and its ability to continue to generate earnings required to ensure its long-term viability. The adequacy of an institution’s earnings will be evaluated in the context of the nature, scope, complexity, and risk profile of the institution. This evaluation considers quality, quantity and volatility of earnings.

The institution has consistent earnings performance, producing returns that significantly contribute to its long term viability, and there is no undue reliance on non-recurring sources of income to enhance earnings. The earnings outlook for the next 12 months continues to be positive.

The institution has satisfactory earnings performance, producing returns needed to ensure its long term viability, and there is no undue reliance on non-recurring sources of income to enhance earnings. Although there is some exposure to earnings volatility, the outlook for the next 12 months remains positive.

The institution has inconsistent earnings performance, with returns that may, at times, be inadequate to ensure its long term viability. It may occasionally depend on nonrecurring sources of income to show a profit. The earnings outlook for the next 12 months is uncertain.

The institution has consistently recorded operating losses or earnings that are insufficient to ensure its long term viability. It may be heavily dependent on non-recurring sources of income to show a profit. The earnings outlook for the next 12 months is expected to remain negative.

3.1 Vulnerability of earnings to competition.

3.2 Extent to which the institution’s earnings may be affected by an economic downturn or market event.