There are multitudes of issues to work on while analyzing a bank. They can be broken down to Asset Quality, Liquidity, Earnings, Capital, Sensitivity to Market Risk, Management.
Asset Quality-
Distribution and Severity of Classified Assets. Substandard, Doubtful, or Loss. Asset Quality of adversely classified assets, nonaccruals, and concentration of risk inherent in the loan portfolio.
1- Level of nonaccrual loans to total loans
2- ALLL ( Allowances for loan and Lease losses)
3- Volume and Nature of special mention classification
4- Past Due and Nonaccrual loans to total loans
5- Lending policies and credit administration procedures
6- Asset Class and its concentration within an industry or segment
Liquidity-
1- Volatility of deposits
2- Frequency and level of borrowing
3- Technical competence relative to structure of liabilities
4- Availability of assets readily convertible to cash.
5- Access to money markets or other ready source of funds
6- Overall effectiveness of asset liability management strategies
7- Net loans and leases to deposits and net non core dependence ratios
Earnings-
1- Ability o cover losses and provide adequate capital
2- Earning trends, and the quality and composition of net income
3- Reliance on interest sensitive funds
4- Adequacy of provisions to the ALLL
5- Net Income to Average Assets
6- Net Interest income to Average Assets. Net Interest Income can be adversely affected by increasing level non-accrual loans, loan modifications, declining yields on loans and higher cost of funds
7- Overhead Expense to Average Assets
8- Provisions to Average Assets
Capital
1- Class of Assets and its concentration within a business or segment
2- Exposure to market conditions and its concentration.
3- Volume of Severity of risk assets
4- Growth Experience and plans
5- Earning retention
6- Tier 1 Leverage capital to Average Total Assets
7- Tier 1 risk based capital
8- Total risk based capital
Sensitivity to Market Risk
1- Changes in social, economic and political condition
2- Sensitivity of earnings or the economic value of its capital to the adverse changes in interest rates
3- Ability of management to identify, measure, monitors, and control exposure to market risks
4- Nature and complexity of interest rate risk exposure arising from non trading positions
Management
1- Education and experience
2- Technical competence.
3- Leadership and administrative ability
4- Compliance with banking regulation and statutes
5- Adequacy and compliance with internal policies
6- Depth and succession
7- Ability to plan and respond to changing circumstances
8- Quality of internal controls and operating procedures
