Question

Community Bank has the following balance sheet, rates earned on its assets, and rates paid on its liabilities.

Balance Sheet (in thousands)

Assets		Rate Earned (%)
Cash and due from banks	$?7,900	0
Investment securities	29,600	1.50
Repurchase agreements	15,960	1.15
Loans less allowance for losses	106,400	7.25
Fixed assets	13,500	0
Other assets	??5,320	0
Total assets	$178,680
Liabilities and Equity		Rate Paid (%)
Demand deposits	$?27,490	0
NOW accounts	90,700	0.50
Retail CDs	23,940	1.20
Subordinated debentures	?15,000	5.50
Total liabilities	157,130
Common stock	5,000
Paid-in capital surplus	5,000
Retained earnings	?11,550
Total liabilities and equity	$178,680

If the bank earns $159,000 in noninterest income, incurs $306,000 in noninterest expenses, and pays $3,320,000 in taxes, what is its net income? (Please show work)

Answer 1

Interest income = (29,600,000 x 1.50%) + (15,960,000 x 1.15%) + (106,400,000 x 7.25%)

= 444,000 + 183,540+ 7,714,000

= $8,341,540

Interest expenses = (90,700,000 x 0.50%) + (23,940,000 x 1.20%) + (15,000,000 x 5.50%)

= 453,500 + 287,280 + 825,000

= $1,565,780

Interest income	8,341,540
+ Non interest income	159,000
Total income	8,500,540
Less: Interest expense	- 1,565,780
Less : Non interest expenses	- 306,000
Income before tax	6,628,760
Less : Income tax	- 3,320,000
Net income	3,308,760

Net income = $3,308,760

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