Profitability
Yield on Earning Assets
Also known as Yield on EA
Yield on Earning Assets measures gross interest income as a percentage of average earning assets. It is the asset-side input to net interest margin — the bank's gross interest rate.
Formula
Earning assets include loans, securities, and balances with other banks. Tax-equivalent yield grosses up tax-exempt income (municipal securities) so it's comparable to taxable yield. The metric is always reported as an annualized rate.
Why it matters
Yield on Earning Assets tells you the average rate the bank is earning across its lending and investing activities. Combined with Cost of Funds, it produces NIM. Banks with concentrated lending in higher-yielding categories (credit cards, commercial real estate, agricultural) report higher yields; banks with heavy government securities exposure report lower yields.
How to interpret
Most US community banks report yields between 4.0% and 5.5% in current rate environments. Compare to peer banks of similar asset mix — large divergence suggests either better loan pricing or a different risk-yield profile.
Thresholds
| Range | Label | Interpretation |
|---|---|---|
| ≥ 5.5% | High | Above-average asset pricing. |
| 4.0–5.5% | Normal | Typical current-rate range. |
| 3.0–4.0% | Watch | Below-peer; may reflect asset mix. |
| < 3.0% | Low | Substantially below peer. |
Worked example
Frequently asked
Why are some yields tax-equivalent?
Banks holding municipal securities receive tax-exempt interest. Grossing up to a 'tax-equivalent yield' lets you compare against taxable yields fairly. The gross-up uses the bank's marginal tax rate (typically 21% federal + state).
Sources
- FFIEC Call Report Schedule RI
See Yield on EA across 4,394 US banks
BankRegReports ranks every FDIC-insured institution by Yield on EA, refreshed quarterly within 48 hours of FFIEC release.