Homework Sourse2 The Great National Bank has the following balance sheet an
| 2) | The Great National Bank has the following balance sheet and income statement: | 27 Points | |||||||||||||||||
| Assets | Liabilities and Equity | ||||||||||||||||||
| Cash and due from banks | $8,000 | Demand deposits | $16,000 | ||||||||||||||||
| Investment securities | $20,000 | NOW accounts | $79,000 | ||||||||||||||||
| Repurchase agreements | $35,000 | Retail CD\'s | $23,000 | ||||||||||||||||
| Loans | $75,000 | Debentures | $21,000 | ||||||||||||||||
| Fixed assets | $20,000 | Total Liabilities | $139,000 | ||||||||||||||||
| Other assets | $6,000 | Common stock | $10,000 | ||||||||||||||||
| Paid-in capital | $5,000 | ||||||||||||||||||
| Total assets | $164,000 | Retained earnings | $10,000 | ||||||||||||||||
| Total Liabilities and Equity | $164,000 | ||||||||||||||||||
| Income Statement | |||||||||||||||||||
| Interest on fees and loans | $11,000 | ||||||||||||||||||
| Interest on investment securities | $5,000 | ||||||||||||||||||
| Interest on repurchase agreements | $7,000 | ||||||||||||||||||
| Interest on deposits in banks | $1,000 | ||||||||||||||||||
| Total interest income | $24,000 | ||||||||||||||||||
| Interest on deposits | $8,000 | ||||||||||||||||||
| Interest on debentures | $3,000 | ||||||||||||||||||
| Total interest expense | $11,000 | ||||||||||||||||||
| Net interest income | $13,000 | $ 13,000 = [Total interest income ($ 24,000) less Total interest expense ($ 11,000) | |||||||||||||||||
| Provision for loan losses | $3,000 | ||||||||||||||||||
| Noninterest income | $1,000 | ||||||||||||||||||
| Noninterest expenses | $1,000 | ||||||||||||||||||
| Income before taxes | $10,000 | ||||||||||||||||||
| Taxes | $4,000 | ||||||||||||||||||
| Net income | $6,000 | ||||||||||||||||||
| For The Great National Bank, 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 | ||||||||||||||||||
| a. | Return on Equity = | Net income / Total equity capital | total equity capital = common stock + paid-in capital + retained earnings | ||||||||||||||||
| = | 6,000/(10,000 + 5,000 + 10,000) = | ||||||||||||||||||
| b. | Return on Assets = | (Net income / Total assets) | |||||||||||||||||
| = | 6,000/164,000 = | ||||||||||||||||||
| c. | Asset utilization = | Total operating income / Total assets | total operating income = interest income + noninterest income | ||||||||||||||||
| = | (24,000 + 1,000)/164,000 = | ||||||||||||||||||
| d. | Equity multiplier = | Total assets / Total equity capital | |||||||||||||||||
| = | 164,000/(10,000 + 5,000 + 10,000) = | ||||||||||||||||||
| e. | Profit margin = | Net income / Total operating income | |||||||||||||||||
| = | 6,000/(24,000 + 1,000) = | ||||||||||||||||||
| f. | Interest expense ratio = | Interest expense / Total operating income | |||||||||||||||||
| = | 11,000/(24,000 + 1,000) = | ||||||||||||||||||
| g. | Provision for loan loss ratio = | Provision for loan losses / Total operating income | |||||||||||||||||
| = | 3,000/(24,000 + 1,000) = | ||||||||||||||||||
| h. | Noninterest expense ratio = | Noninterest expense / Total operating income | |||||||||||||||||
| = | 1,000/(24,000 + 1,000) = | ||||||||||||||||||
| i. | Tax ratio = | Income taxes / Total operating income | |||||||||||||||||
| = | 4,000/(24,000 + 1,000) = |
| 2) | The Great National Bank has the following balance sheet and income statement: | 27 Points | |||||||||||||||||
| Assets | Liabilities and Equity | ||||||||||||||||||
| Cash and due from banks | $8,000 | Demand deposits | $16,000 | ||||||||||||||||
| Investment securities | $20,000 | NOW accounts | $79,000 | ||||||||||||||||
| Repurchase agreements | $35,000 | Retail CD\'s | $23,000 | ||||||||||||||||
| Loans | $75,000 | Debentures | $21,000 | ||||||||||||||||
| Fixed assets | $20,000 | Total Liabilities | $139,000 | ||||||||||||||||
| Other assets | $6,000 | Common stock | $10,000 | ||||||||||||||||
| Paid-in capital | $5,000 | ||||||||||||||||||
| Total assets | $164,000 | Retained earnings | $10,000 | ||||||||||||||||
| Total Liabilities and Equity | $164,000 | ||||||||||||||||||
| Income Statement | |||||||||||||||||||
| Interest on fees and loans | $11,000 | ||||||||||||||||||
| Interest on investment securities | $5,000 | ||||||||||||||||||
| Interest on repurchase agreements | $7,000 | ||||||||||||||||||
| Interest on deposits in banks | $1,000 | ||||||||||||||||||
| Total interest income | $24,000 | ||||||||||||||||||
| Interest on deposits | $8,000 | ||||||||||||||||||
| Interest on debentures | $3,000 | ||||||||||||||||||
| Total interest expense | $11,000 | ||||||||||||||||||
| Net interest income | $13,000 | $ 13,000 = [Total interest income ($ 24,000) less Total interest expense ($ 11,000) | |||||||||||||||||
| Provision for loan losses | $3,000 | ||||||||||||||||||
| Noninterest income | $1,000 | ||||||||||||||||||
| Noninterest expenses | $1,000 | ||||||||||||||||||
| Income before taxes | $10,000 | ||||||||||||||||||
| Taxes | $4,000 | ||||||||||||||||||
| Net income | $6,000 | ||||||||||||||||||
| For The Great National Bank, 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 | ||||||||||||||||||
| a. | Return on Equity = | Net income / Total equity capital | total equity capital = common stock + paid-in capital + retained earnings | ||||||||||||||||
| = | 6,000/(10,000 + 5,000 + 10,000) = | ||||||||||||||||||
| b. | Return on Assets = | (Net income / Total assets) | |||||||||||||||||
| = | 6,000/164,000 = | ||||||||||||||||||
| c. | Asset utilization = | Total operating income / Total assets | total operating income = interest income + noninterest income | ||||||||||||||||
| = | (24,000 + 1,000)/164,000 = | ||||||||||||||||||
| d. | Equity multiplier = | Total assets / Total equity capital | |||||||||||||||||
| = | 164,000/(10,000 + 5,000 + 10,000) = | ||||||||||||||||||
| e. | Profit margin = | Net income / Total operating income | |||||||||||||||||
| = | 6,000/(24,000 + 1,000) = | ||||||||||||||||||
| f. | Interest expense ratio = | Interest expense / Total operating income | |||||||||||||||||
| = | 11,000/(24,000 + 1,000) = | ||||||||||||||||||
| g. | Provision for loan loss ratio = | Provision for loan losses / Total operating income | |||||||||||||||||
| = | 3,000/(24,000 + 1,000) = | ||||||||||||||||||
| h. | Noninterest expense ratio = | Noninterest expense / Total operating income | |||||||||||||||||
| = | 1,000/(24,000 + 1,000) = | ||||||||||||||||||
| i. | Tax ratio = | Income taxes / Total operating income | |||||||||||||||||
| = | 4,000/(24,000 + 1,000) = |
Solution
answer:
a. return on equity = 6000/ 25000 = 0.24
b. return on assets = 6000/ 164000 = 0.036
c. asset utilization = 25000/ 164000 = 0.1524
d.equity multiplier = 164000/25000 = 6.56
e. profit margin = 6000/25000 = 0.24
f. interest expense ratio = 11000/25000 = 0.44
g. provision for loan loss ratio = 3000/25000 = 0.12
h. non interest expense ratio = 1000/25000 = 0.04
i. tax ratio = 4000/25000 = 0.16
all these have been calculated using the above given formulas.
