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paid interest expense of $ 3.00. The NIM then is computed as ($ 6.00 – $ 3.00) / $ 100.00 = 3%. Net interest income equals the interest earned on interest-earning assets (such as interest earned on loans and investment securities) minus the interest paid on interest-bearing liabilities (such as interest paid to customers on their deposits).
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NIM is calculated as a percentage of net interest income to average interest-earning assets during a specified period. For example, a bank's average interest-earning assets (which generally includes, loans and investment securities) was $ 100.00 in a year while it earned interest income of $ 6.00 and
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In particular, for a bank or a financial institution, if the bank or financial institution has a significant amount of non-performing assets (such as loans where full repayment is in doubt), its NIM will generally decrease because interest earned on non-performing assets is treated, for accounting
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It is usually expressed as a percentage of what the financial institution earns on loans in a time period and other assets minus the interest paid on borrowed funds divided by the average amount of the assets on which it earned income in that time period (the
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income generated by banks or other financial institutions and the amount of interest paid out to their lenders (for example, deposits), relative to the amount of their (interest-earning) assets. It is similar to the gross margin (or gross
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Successful Bank Asset/Liability
Management: A Guide to the Future Beyond Gap, John W. Bitner, Robert A. Goddard, 1992, p. 185.
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purposes, as repayment of principal and not payment of interest due to the uncertainty that the loan will be fully repaid.
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Difference between the interest income generated by a bank and the amount of interest it pays out
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