Mutual Savings Association: Efficiency Ratio

A bank's efficiency ratio is its noninterest expense divided by its revenue, net interest income plus noninterest income. It shows how many cents the bank spends to earn each dollar of revenue, so a lower ratio is better.

Compare banks of similar size and business model. Very small banks rarely run below 60% because fixed costs are spread over less revenue, and fee-heavy banks with trust or mortgage businesses carry higher expense against their revenue. The trend matters as much as the level: a rising ratio means expenses are growing faster than revenue. A very low ratio can also mean underinvestment in staff or systems.