Figure 27. Noninterest expense and goodwill impairment losses, and selected components of noninterest expense, as a proportion of total assets, 2002-08
There are two panels. Data are plotted as curves. The top panel shows noninterest expense less goodwill impairment losses, and separately, goodwill impairment losses. Noninterest expense less goodwill impairment losses starts in 2002 at 3.5 percent, and trends down to just under 3 percent at the end of 2008. The goodwill impairment losses curve is close to zero over the time period until the fourth quarter of 2008 when it jumps to about three-fourths of a percent. The bottom panel shows selected components of noninterest expense. The salaries and benefits curve starts at about 1.5 percent of total assets in 2002 and trends down slightly to end 2008 at about 1.2 percent. The other noninterest expense curve follows a similar pattern, starting in 2002 at about 1.4 percent. It then moves up at the end of 2002, declines to a low of about 1 percent in 2007, turns up slightly in 2008, and ends the year just below 1.4 percent. Premises and fixed assets are relatively stable at just under one-half of one percent, though the curve moves very slightly lower (less than one-tenth of a percent) over the time period. With the exception of a slight jump at the end of 2007, the amortization and goodwill impairment losses curve is flat over the time period until the fourth quarter of 2008 when it jumps to about three-fourths of a percent.
NOTE: The data are quarterly. Banks incur goodwill impairment losses when the market value of their business segments (or reporting units) drops below the fair value recorded by the company. Companies must test for impairment of goodwill annually or when events occur that would likely reduce the fair value of a reporting unit (business segment) below the carrying value. Assets are written down when considered overvalued compared with the market value--that is, the amount that a potential (or actual) acquirer would be willing to pay (or had paid) for the assets.
