Dokumen - Tips Chapter 12 Homework

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Name : 阮 氏 泰 河

Student Number: U9824629

Chapter 12 Homework/04/28/2011

HW12-1
If you know the following figures:

Total Interest Income 290 Provision for Loan Loss 10


Total Interest Expense 205 Income Taxes 15
Total Noninterest Income 27 Dividends to Common 11
Total Noninterest Expense 40 Shareholders

Please Calculate these items:

Net Interest Income = Total Interest Income - Total Interest Expense = 290 – 205=85
Net Noninterest Income = Total Noninterest Income - Total Noninterest Expense=27-40=-13
Pretax net operating income = Net Interest Income + Net Noninterest Income and PLL=85-13+10=82
Net Income After Taxes = Pretax net operating income - PLL - Taxex=82-10-15=57
Total Operating Revenues = Interest Income + Noninterest Income = 290 + 27 = 317
Total Operating Expenses = Interest Expenses+ Noninterest Expenses + PLL = 205 + 40 + 10 = 255
Increases in Undivided Profit = Net Income After Taxes – Dividends = 57- 11=46

HW12-2
Hokie High Bank has Gross Loans of $550 million with an ALL account of $30 million. Two
years ago the bank made a loan for $10 million to finance the Hokie Hotel. One million dollars
in principal was repaid before the borrowers defaulted on the loan. The Loan Committee at
Hokie High Bank believes the hotel will sell at auction for $7 million and they want to charge-
off the remainder immediately.
1. The dollar figure for Net Loans before the charge-off is ?

Net Loans = Gross Loans –ALL = $550 - $30 = $520

2. After the charge-off, what are the dollar figures for Gross Loans, ALL and Net
Loans assuming no other transactions.

Gross Loans = $550 - $9 = $541 *assuming the $1 in principal has been


recognized on the balance sheet yet

ALL = $30 - $2 = $28 *The amount of the loan that is bad

Net Loans = $541 -$28 = $513


3. If the Hokie Hotel sells at auction for $8 million, how with the affect the pertinent
balance sheet accounts?

Gross loans would not change but ALL would be $29 because only $1 million would be
bad and net loans would go down by $1 million

1
Name : 阮 氏 泰 河
Student Number: U9824629

HW12-3
You were informed that a bank’s latest income and expense statement contained the following
figures (in millions):

Net Interest Income $800


Net Noninterest Income ($300)
Net Income before Income Taxes $484
Increase in Undivide Profit $100

Suppose you also were told that the bank’s total interest income is twice as large as its total
interest expense and its noninterest income is three fourths of its noninterest expense. Imagine
that its provision for Loan Losses equals 1 percent of its total interest income, while its taxes
generally amount to 30 percent of its net income before income taxes. Calculate the following
items for this bank’s income and expense statement

Total Interest Income (TII) and Total Interest Expense(TIE):

TII = 2TIE and Net Interest Income = TII –TIE = $800 so:
2TIE –TIE = $800 TIE = $800 and TII = 2($800) = $1600

Total Noninterest Income (TNI) and Total Noninterest Expense(TNE):

TNI = .75TNE and Net Noninterest Income = TNI – TNE = -$300 s0:
.75TNE – TNE = -$300 -.25TNE = $300 TNE = $1200 and TNI = .75($1200) = $900
Provision for Loan Losses

PLL = .01*Total Interest Income = .01*($1600) = $16

Taxes

Net Income Before Taxes = Net Interest Income + Net Noninterest Income –PLL
Net Income Before Taxes = $800 + -$300 - $16 = $484
Taxes = .3* Net Income Before Taxes = .3*484 = $145.2

Dividends

Net Income After Taxes = Net Income Before Taxes - Taxes


Net Income After Taxes = $484 - $145.2 = $338.8
Increase in Undivided Profit = Net Income After Taxes – Dividends
Dividends = Net Income After Taxes – Increase in Undivided Profit
Dividends= $338.8 - $100 = $238.8

HW12-4
(Question 16 of the context book on page 376)
N M
NI= ∑ r n A n− ∑ r m Am −P+ NII −NIE−T
n =1 m=1

2
Name : 阮 氏 泰 河
Student Number: U9824629

= [0.04(6000)+0.08(22000)+0.06(12000)+0.1(10000)+0.09(4000)] –
[0.05(69000)+0.07(18000)+0.08(14000)] + 120000 – 80000 – 2500000 = $- 2,454,750
HW12-5
(Question 17 of the context book on page 376)
Total operating income = total interest income + noninterest income = 20,000 + 2,000 = 22,000
Net income 5000
a. ROE= = =0.178
Total equity 183000−155000
Net income 5000
b. ROA= = =0.027
Total asset 183000
Total operating i ncome 22000
c. AU = = =0.1202
Total asset 183000
Total asset 183000
d. EM = = =6.535
Total eqity 183000−155000
Net income 5000
e. PM = = =0.227
Total operating income 22000
Interest expense 11000
f. Interest expense rat io= = =0.5
Total operating income 22000
Provision for loan loss 2000
g. Provision for loan loss ratio= = =0.09
Total operating income 22000
Noninterst expense 1000
h. Noninterest expenseratio= = =0.045
Total operating income 22000
income tax 3000
i. Tax ratio= = =0.136
Total operating income 22000
HW12-6
(Question 19 of the context book on page 377)
ROA= PM x AU= 21% x 11% = 2.31%
ROE= ROA x EM= (0.0231 x 12)100% = 27.72%
HW12-7
(Question 20 of the context book on page 377)

3
Name : 阮 氏 泰 河
Student Number: U9824629

HW12-8

(1) Blue Ridge Bank has a PM of 12%, an interest income to total assets ratio of 6.00% and a
noninterest income to assets ratio of 1.50%. Blue Ridge also has $9 in assets per dollar in
equity capital. Blue Ridge's ROE is 
C. 8.10%

(2) Oceanside bank converts a dollar of equity into 10 cents of net income and has $9.50 in
assets per dollar of equity capital. Oceanside also has a profit margin of 15%. What is
Oceanside's AU ratio? 
E. 7.02%

(3) Plains National Bank has interest income of $250 million and interest expense of $110
million, noninterest income of $40 million and noninterest expense of $65 million on
earning assets of $3,900 million. What is Plains' overhead efficiency ratio? 
A. 61.54%

(4) The First Bank of the Ozarks generates $0.0155 dollars of net income per dollar of assets
and it has a profit margin of 12.25%. How much operating income per dollar of total
assets does First Bank generate? 
B. 12.65%

(5)  A __________________ is a contra asset account. 


C. Allowance for loan and lease losses

HW12-9
The latest report of condition and income and expense statement for Galloping Merchants
National Bank are as shown in the following tables:

Galloping Merchants National Bank

Interest Fees on Loans $65


Interest Dividends on Securities 12
Total Interest Income 77

Interest Paid on Deposits 49


Interest on Nondeposit Borrowings 6

4
Name : 阮 氏 泰 河
Student Number: U9824629

Total Interest Expense 55

Net Interest Income 22


Provision for Loan Losses 2
Noninterest Income and Fees 7
Noninterest Expenses:
Salaries and Employee Benefits 12
Overhead Expenses 5
Other Noninterest Expenses 3
Total Noninterest Expenses 20
Net Noninterest Income -13

Pre Tax Operating Income 7


Securities Gains (or Losses) 1
Pre Tax Net Operating Income 8
Taxes 1
Net Operating Income 7
Net Extraordinary Income -1
Net Income $6

FTE 40

Galloping Merchants National Bank


Report of Condition

$10
Cash and Due From Banks 0 Demand Deposits $190
$15
Investment Securities 0 Savings Deposts $180
Federal Funds Sold $10 Time Deposits $470
$67
Net Loans 0 Federal Funds Purch $69
(ALL 25) Total Liabilities $900
(Unearned Income 5) Common Stock $20
Plant and Equipment $50 Surplus $25
Retained Earnings $35
$98
Total Assets 0 Total Ca $80

$83 Interest Bearing


Total Earnings Assets 0 Deposits $650

Fill in the missing items on the income and expense statement. Using these statements, calculate the
following performance measures:
Net Income $6
ROE =   .075 or 7.5%
Total Equity Capital $80
Net Income $6
ROA =   .00612 or .612%
Total Assets $980

5
Name : 阮 氏 泰 河
Student Number: U9824629

Net Interest Income $22


Net Interest Margin =   .0224 or 2.24%
Total Assets $980
-$13
Net Noninterest Margin =  .0133 or -1.33 percent
$980
Total Operating Revenues - Total Operating Expenses $84  $77
Net Operating Margin =   .00714 or .714%
Total Assets $980
Total Interest Income Total Interest Expenses $77 $55
Earnings Spread =     .01531 or 1.53 %
Total Earnings Assets Total Interest Bearing Liabilities $830 $710
Net Income $6
Net Profit Margin =   .0714 or 7.14 percent
Total Operating Revenues $84
Total Operating Revenues $84
Asset Utilization =   .0857 or 8.57%
Total Assets $980
Total Assets $980
Equity Multiplier =   12.25 x
Total Equity Capital $80
Net Income $6
Tax Management Efficiency = = =.857 or 85.7%
Pre Tax Net Operating Income $ 7
Pre Tax Net Operating Income $ 7
Expense Control Efficiency = = =.0833 or 8.33%
Total Operating Revenue $ 84
Total Operating Revenues $84
Asset Management Efficiency Ratio =   .0857 or 8.57%
Total Assets $980
Total Assets $980
Funds Management Efficiency Ratio =   12.25 x
Total Equity Capital $80
Total Operating Expenses $ 78( including taxes )
Operating Efficiency Ratio = = =. 9176 or 91. 76%
Total Operating Revenues $ 85(including securities gains )

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