Drip Portfolio Report
Monday, March 30, 1998
by Dale Wettlaufer ([email protected])

ALEXANDRIA, VA (Mar. 30, 1998) -- Before we go on with the various financial statements, we'll lay out a glossary that will be kept in the DRIP port archives. This way, you can familiarize yourself with some of these terms and refer back to the glossary when you need to.

Income Statement Terms

Interest Income This is the first component of a bank's or financial services company's revenues. It is comprised of interest, dividends, and fees received on earning assets such as loans, bonds, preferred stock, and other interest-bearing assets. Depending on the company, interest income will be broken down by business line (such as lending, trading, and securities).

Interest expense The cost of funds the company borrows on a short- and long-term basis, buys in the money markets, or takes in from depositors.

Net interest income This is interest income minus interest expense. Net interest margin, which is the net yield on earning assets, is calculated as interest income minus interest expense divided by average earning assets: 

 
   Interest income minus interest expense 
 ------------------------------------------ 
           Average earning assets 
 
 
       
 
       Mathematically, it can also be calculated by: 
       
 
       
 
   Interest income           Interest expense      
   ------------------- minus ------------------- 
   Avg. Earning Assets       Avg. Earning Assets 
 
 
       
 
       The three components can tell you a lot about what sort of business the company 
       is in, even if you have no idea what type of bank you are looking at. This 
       takes some experience, but the general rule of thumb in lending and in the 
       securities markets is the higher the rate of interest (reward), the higher 
       the amount of risk. 
       
 
       By breaking down a company's interest income and interest expense as a percentage 
       of average earning assets, you can see the difference between the yield of 
       earning assets and the cost of earning assets. The combination of the two 
       is the net yield on earning assets. Unlike the income statement of a 
       manufacturing or service company, what can be seen as an explicit expense 
       is shown on the revenues line. The income statement of a bank is somewhat 
       more integrated than other income statements, as a major cost of revenues 
       -- interest expense -- is right next to interest income (a major part of 
       revenues) on the income statement. 
       
 
       Tomorrow, loan loss provisions, charge-offs, and noninterest income. 
       
 
       FoolWatch -- It's what's 
       going on at the Fool today. 
       
 
 
 
       
 
       TODAY'S 
       NUMBERS 
       
 
 Stock   Close     Change 
 INTC  77  7/16   -1 7/16 
 JNJ   71 11/16    + 3/16 
 
 
 
 
             Day     Month    Year    History 
 Drip      (0.95%)  (8.65%)   6.36%   (9.43%) 
 S&P 500   (0.17%)   4.22%   12.69%   14.95% 
 Nasdaq    (0.27%)   2.72%   15.81%   14.11% 
  
  
 Last Rec'd  Total #  Security   In At    Current 
  03/02/98    8.625     INTC    $80.572   $77.438 
  03/10/98    3.170     JNJ     $67.087   $71.688 
  
  
 Last Rec'd Total# Security In At   Value   Change 
  03/02/98  8.625    INTC  $694.94 $667.90 ($27.04) 
  03/10/98  3.170    JNJ   $212.67 $227.25  $14.58 
  
 Base:  $1300.00 
 Cash:   $339.76** 
 Total: $1234.91 
  
 
 
     
 
     The Drip Portfolio has been divided into 54.538 shares with an average purchase 
     price of $23.837 per share. 
     
 
     The portfolio began with $500 on July 28, 1997, adds $100 on the 1st of every 
     month, and the goal is to have $150,000 in stock by August of the year 2017. 
     
 
     **Transactions in progress: 
     
 
     03/17/98: Sent $81 to buy/enroll in CPB. 
 
     03/17/98: Sent $70 to buy more JNJ. 
 
     03/16/98: Sent $30 to buy more INTC.