Problem 1:
The financial statements for THE Bank are shown below:
Balance Sheet THE Bank
| Assets |
|
| cash |
$200 |
| demand deposits fromt other Fis |
$600 |
| investments |
$1,800 |
| federal funds sold |
$900 |
| loans |
$6,900 |
| reserve for loans losses |
$500 |
| premises |
$750 |
|
|
| Total assets |
$10,650 |
| liabilities and equity |
|
| demand deposits small time |
$ 2,450.00 |
| deposits |
$ 4,800.00 |
| jumbo CDs |
$ 1,425.00 |
| federal funds purchased |
$ 1,000.00 |
| equity |
$ 975.00 |
|
|
|
|
|
|
| Total liabilities/equities |
$10,650 |
| Income statement THE Bank |
|
| interest income |
$2,450 |
| interest expense |
$1,630 |
| provision for loan losses |
$80 |
| noninterest income |
$240 |
| noninterest expense |
$410 |
| taxes |
$40 |
a) calculate THE bank's earning assets
b) Calculate THE Bank's ROA.
C) Calculate THE Bank's total operating income.
d) Calculate THE Bank's spread.
Problem 2:
Megalopolis Bank has the following balance sheet and income statement.
Balance Sheet (in millions)
| Balance Sheet (in millions) |
| Assets |
|
| cash and due from banks |
$9,000 |
| investment securities |
$23,000 |
| repurchase agreements |
$42,000 |
| loans |
$90,000 |
| fixed assets |
$15,000 |
| other assets |
$4,000 |
| Total assets |
$183,000 |
| Income statement |
|
|
| interest on fees and loans |
|
$9,000 |
| interest on investment securities |
$4,000 |
| interest on repurchase agreements |
$6,000 |
| interest on deposits in banks |
|
$1,000 |
| total interest income |
|
$20,000 |
| interest on deposits |
|
$9,000 |
| interest on debentures |
|
$2,000 |
| total interest expense |
|
$11,000 |
| net interest income |
|
$9,000 |
| provision for loan losses |
|
$2,000 |
| noninterest income |
|
$2,000 |
| noninterest expenses |
|
$1,000 |
| income before taxes |
|
$8,000 |
| taxes |
|
$3,000 |
| net income |
|
$5,000 |
For Megalopolis, calculate:
a) return on equity
b) return on assets
c) asset utilization
d) equity multiplier
e) profit margin
f) interest expense ratio
g) provision for loan loss ratio
h) noninterest expense ratio
i) tax ratio
Problem 3: Anytown bank has the following ratios:
a) profit margin 21%
B) asset utilization 11%
C) equity multiplier 12X
calculate anytown's ROE and ROA:
Problem 4:
2- Two depository institutions have composite CAMELS ratings of 1 or 2 and are "well capitalized." Thus, each institution falls into the FDIC Risk Category I deposit insurance assessment scheme. Further, the institutions have the following financial ratios and CAMELS ratings:
|
Insitution 1 |
institution 2 |
| Tier I leverage ratio (%) |
10.25 |
7 |
| loans past due 30-89 days /gross assets (%) |
0.6 |
0.82 |
| nonperforming assets/gross assets (%) |
0.45 |
0.9 |
| net loan charge-offs/ gross assets (%) |
0.08 |
0.25 |
| net income before taxes/risk weighted assets (%) |
2.4 |
1.65 |
| adjusted brokered deposits ratio (%) |
0 |
25.89 |
|
|
|
| CAMELS components: |
|
|
| C |
1 |
2 |
| A |
1 |
1 |
| M |
1 |
1 |
| E |
2 |
1 |
| L |
1 |
3 |
| S |
2 |
3 |
Calculate the initial deposit insurance assessment for each situation
What is the contribution to the asset base of the following items under the Basel requirements? Under the U.S. capital-to-assets rule?
a) $10 million cash reserves.
b) $50 million 91-day U.S. Treasury bills.
c) $5 million U.K. government bonds, AAA rated.
d) $1 million general obligation municipal bonds
e) $40 million repurchase agreements (against U.S treasuries)
f) $500 million one-to four- family home mortgages
g) $500 millions commercial and industrial loans, BBB rates.
h) $100,000 performance related standby letters of credit to a blue chip corporation
i) $7 million commercial letter of credit to a foreign, A rated company
j) $8 million banker's acceptane conveyed to a U.S., AA rated corporation
k) $17 million three-year loan commitment to a private agent
l) $17 million three-month loan commitment to a private agent
m) $30 million standby letter of credit to back a corporate issue of commercial paper
n) $4 million five-year interest rate swap with no current exposure ( the counterparty is a private agent)
o) $6 million two-year currency swap with $500,000 current exposure ( the counterparty is a private agent )