Question

The financial statements for MHM Bank (MHM) are shown below:

Balance Sheet MHM Bank
Assets Liabilities and Equity
  Cash and due from banks $ 2,060   Demand deposits $ 10,760
  Demand deposits at other FIs 2,500   Small time deposits 10,490
  Investments 6,350   Jumbo CDs 7,810
  Federal funds sold 3,130   Federal funds purchased 610
  Loans (less reserve for loan losses of 3,800) 20,330   Other liabilities 3,680
  Premises 2,410   Equity 3,430


  Total assets $ 36,780   Total liabilities/equity $ 36,780

Income Statement MHM Bank
  Interest income $ 4,338
  Interest expense 2,294
  Provision for loan losses 1,500
  Noninterest income 840
  Noninterest expense 1,115
  Taxes 375

a.

Calculate the dollar value of MHM’s earning assets.

  MHM’s earning assets $   

b.

Calculate the dollar value of MHM’s interest-bearing liabilities.

  MHM’s interest-bearing liabilities $   

c.

Calculate MHM’s spread. (Do not round intermediate calculations. Round your answer to 3 decimal places. (e.g., 32.161))

  MHM’s spread %

d.

Calculate MHM’s interest expense ratio. (Round your answer to 3 decimal places. (e.g., 32.161))

  MHM’s interest expense ratio %  

Answer 1

1.

MHM’s earning assets
Demand deposits at other FIs	$          2,500
Investments	$          6,350
Federal Funds Sold	$          3,130
Loans	$        20,330
Total	$        32,310

2.

MHM’s Interest bearing Liabilities
Demand Deposits	$        10,760
Small Time Deposits	$        10,490
Jumbo CDs	$          7,810
Federal Funds Purchased	$ 610
Total	$        29,670

3.

MHM’s earning assets:-
Demand deposits at other FIs	$             2,500
Investments	$             6,350
Federal Funds Sold	$             3,130
Loans	$           20,330
Total Assets	$           32,310
Interest Income	$             4,338
Interest rate Charged	13.426%
MHM’s Interest bearing Liabilities
Demand Deposits	$           10,760
Small Time Deposits	$           10,490
Jumbo CDs	$             7,810
Federal Funds Purchased	$ 610
Total	$           29,670
Interest Expense	$             2,294
Inerest Rate paid	7.732%
Spread (Interest arte Charged - Interest Rate paid)	5.694%

4.

Interest Expense Ratio=Interest Expense/(Interest Income+Non Interest Income)

Interest Expense Ratio=2294/(4338+840)

Interest Expense Ratio=44.303%