Board of Governors of the Federal Reserve System

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.