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Figure 1. Projecting net income and regulatory capital

A flowchart with five steps, leading from one to the next.

  • Net interest income plus noninterest income, minus noninterest expense, equals pre-provision net revenue (PPNR).
    (Note: PPNR includes income from mortgage servicing rights and losses from operational-risk events and OREO costs.)
  • PPNR plus other revenue, minus provisions, minus AFS/HTM securities losses, minus HFS/FVO loan losses, minus trading and counterparty losses, equals pre-tax net income.
    (Note: Change in the allowance for loan and lease losses, plus net charge-offs, equals provisions.)
  • Pre-tax net income minus taxes, minus income attributable to minority interest, minus change in the valuation allowance, equals after-tax net income.
  • After-tax net income minus net distributions to common and preferred shareholders and other net reductions to shareholder's equity from DFAST assumptions plus other comprehensive income, equals change in equity capital.
  • Change in equity capital minus change in adjustments and deductions from regulatory capital, plus other additions to regulatory capital, equals change in regulatory capital.
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Last Update: April 08, 2019