Reference no: EM131301035

Question 1:
Given the following figures:

• Total interest income $140 provision for loan losses $5
• Total interest expenses $100
• Income taxes $4
• Total non-interest income $75 Increase in bank's individual profits $6
• Total non-interest expenses $90

Please calculate these items:

• Net interest income
• Total operating revenues
• Net non-interest income
• Total operating expenses
• Pre-tax net operating income
• Dividends paid to common stockholders
• Net income after tax

Question 2:-

If you know the following figures:

• Gross loans $300
• Trading-account securities $2
• Allowance for loan losses $15
• Other real estate owned $4
• Investment securities $36
• Goodwill and other intangibles $3
• Common stock $5
• Total liabilities $375
• Surplus $15
• Preferred stock $3
• Total equity capital $30
• Non-deposit borrowings $40
• Cash and due from banks $10
• Bank premises and equipment, net $20
• Miscellaneous assets $25
• Bank premises and equipment, gross $25

Please calculate these items:

• Total assets
• Fed funds sold
• Net loan
• depreciation
• Undivided profits
• Total deposits

Question 3. The Sea Level Bank has Loans of $800 million with an ALL account of $45 million. Two years ago the bank made a loan for $12 million to finance the sunset hotel. Two million dollars in principal was repaid before the borrowers defaulted on the loan. The loan committee at Sea Level Bank believes the hotel will sell at auction for $7 million and they want to charge off the remainder immediately.

a. The dollar figure for net loans before the charge-off is ---------.

b. After the charge-off, what are the dollar figures for Gross Loans, ALL, and net loans assuming no other transactions?

c. If the Sunset Hotel sells at auction for $10 million, how will this affect the pertinent balance sheet accounts?

4. The latest report of condition and income and expense

statement for Smiling Merchants National Bank are as shown in the following tables:

Smiling Merchants National Bank

Income and Expenses Statement

(Report of Income)

• Interest and fees on loans $50
• Interest and dividends on securities $6
• Total interest income
• Interest paid on deposits $40
• Interest paid on non-deposit borrowings $6
• Total interest expense
• Net interest income
• Provision for loan losses $5
• Non-interest income and fees $20
• Non-interest expenses
• Salaries and employee benefits $10*
• Overhead expenses $5
• Other non-interest expenses $2
• Total non-interest expenses
• Pretax operating income
• Securities gains (or losses) $2
• Pretax net operating income
• Taxes $2
• Net operating income
• Net extraordinary items (-1)

Net income

Smiling Merchants National Bank

Report of condition
Assets:-
Cash and deposits due from bank $100

Investment securities $150

Federal fund sold $10

Net loans $700

(Allowance for loan losses=25)

(Unearned income on loans=5)

Net fixed assets $50

Total assets $980

Total earning assets $860

Liabilities:-

Demand deposits $190

Savings deposits $180

Time deposits $470

Federal funds purchased $80

Total liabilities $920

Equity capital
Common stock $20

Surplus $35

Retained earnings $35

Total capital $90

Interest-bearing deposits $650
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Fill in the missing items on the income and expense statement. Using these statements, calculate the following performance measures.
ROE                                     Asset utilization
ROA                                     Equity multiplier
Net interest margin             Tax management efficiency
Net non-interest margin      Expense control efficiency
Net operating margin          Asset management efficiency
Earnings spread                 Funds management efficiency
Net profit margin                Operating efficiency ratio

What strengths and weaknesses are you able to detect in Happy Merchants' performance?

Question 4. The following information is for Rainbow National Bank:

• Interest income $ 2,250.00
• Interest expense 1,500.00
• Total assets 45,000.00
• Securities losses or gains 21.00
• Earning assets 40,000.00
• Total liabilities 38,000.00
• Taxes paid 16.00
• Shares of common stock outstanding 5,000
• Noninterest income $ 800.00
• Noninterest expense 900.00
• Provision for loan losses 250.00

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Please calculate:

• ROE
• ROA
• Net interest margin
• Earnings per share
• Net noninterest margin
• Net operating margin

Alternative scenarios:
a. Suppose interest income, interest expenses, noninterest income, and noninterest expenses each increase by 3 percent while all other revenue and expense items shown in the preceding table remain unchanged. What will happen to Rainbow ROE, ROA, and earnings per share?

b. On the other hand, suppose Rainbow interest income and expenses as well as its noninterest income and expenses decline by 3 percent, again with all other factors held constant. How would the bank's ROE, ROA, and per share earnings change?