Reference no: EM13850190

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 )