Question

Megalopolis Bank has the following balance sheet and income statement.

Balance Sheet (in millions)
Assets					Liabilities and Equity
Cash and due from banks	$	9,800			Demand deposits	$	27,000
Investment securities		31,000			NOW accounts		97,000
Repurchase agreements		50,000			Retail CDs		36,000
Loans		98,000			Debentures		27,000
Fixed assets		23,000			Total liabilities	$	187,000
Other assets		4,800			Common stock		12,000
					Paid-in capital		4,000
					Retained earnings		13,600
Total assets	$	216,600			Total liabilities and equity	$	216,600

Income Statement
Interest on fees and loans	$	9,800
Interest on investment securities		4,800
Interest on repurchase agreements		6,800
Interest on deposits in banks		1,800
Total interest income	$	23,200
Interest on deposits	$	9,800
Interest on debentures		2,800
Total interest expense	$	12,600
Net interest income	$	10,600
Provision for loan losses		2,800
Noninterest income		2,800
Noninterest expenses		1,800
Income before taxes	$	8,800
Taxes		3,500
Net income	$	5,300

For Megalopolis, calculate (Round your answers to 2 decimal places. (e.g., 32.16)):

e.Profit margin%

f.Interest expense ratio%

g.Provision for loan loss ratio%

h.Noninterest expense ratio%

i.Tax ratio%

Answer 1

E. Profit margin ratio

Profit margin ratio = Net income / [Total interest income + Debenture interest]

=5300/[23200+2800]

=20.38%

F. Interest expenses ratio = Total interest expenses / [Total interest income + Debenture interest]

=12600/[23200+2800]

=48.46%

G.Provision for loan loss ratio = provision for loan loss / [Total interest income + Debenture interest]

=2800 / [23200+2800]

=10.77%

H. Non interest expenses ratio = Non interest expenses / [Total interest income + Debenture interest]

=1800/ [23200+2800]

=6.92%

I Tax ratio = Tax / [Total interest income + Debenture interest]

=3500 / [23200+2800]

=13.46%