The latest report of condition and income and expense statement for Happy Merchants National Bank are as shown in the following tables:
Income and Expense Statement (Report of Income) |
|
Interest and fees on loans |
$44 |
Interest and dividends on securities |
6 |
Total interest income |
50 |
Interest paid on deposits |
32 |
Interest on nondeposit borrowings |
6 |
Total interest expenses |
38 |
Net interest income |
12 |
Provision for loan losses |
1 |
Noninterest income and fees |
16 |
Noninterest expenses: |
|
Salaries and employee benefits |
10 |
Overhead expenses |
5 |
Other noninterest expenses |
2 |
Total noninterest expenses |
17 |
Net noninterest income |
-1 |
Pretax operating income |
10 |
Securities gains (or losses) |
2 |
Pretax net operating income |
12 |
Taxes |
2 |
Net operating income |
10 |
Net extraordinary income |
-1 |
Net income |
9 |
Report of Condition |
|||
Assets |
Liabilities |
||
Cash & deposits due from banks |
$100 |
Demand deposits |
$190 |
Investment securities |
150 |
Savings deposits |
180 |
Federal funds sold |
10 |
Time deposits |
470 |
Net loans |
670 |
Federal funds purchased |
60 |
(Allowance for loan losses = 25) |
Total liabilities |
900 |
|
(Unearned income on loans = 5) |
Equity capital |
||
Plant and equipment |
50 |
Common stock |
20 |
Total assets |
980 |
Surplus |
25 |
Retained earnings |
35 |
||
Total equity capital |
80 |
||
Total Earnings Assets |
830 |
Interest-bearing deposits |
650 |
Using these statements, calculate the following performance measures:
ROE, ROA, Net interest margin, Net operating margin, Earnings spread, Net profit margin, Asset utilization, and Equity multiplier.
A) ROE=
B) ROA=
C) Net interest margin=
D)Net operating margin=
E) Earnings spread=
F)Net profit margin=
G)Asset utilization=
H) Equity multiplier=
Answer of Part a:
ROE = Net Income / Total Equity Capital
ROE = $9 / $80
ROE =0.1125 or 11.25%
Answer of Part b:
ROA = Net Income / Total Assets
ROA = $9 / $980
ROA = 0.0092 or 0.92%
Answer of Part c:
Net Interest Margin = Net Interest Income / Total Assets
Net Interest Margin = $12 / $980
Net Interest Margin =0.0122 or 1.22%
Answer of Part d:
Net Operating Margin = Net Operating Income / Total Assets
Net Operating Margin = $10 / $980
Net Operating Margin = 0.0102 or 1.02%
Answer of Part e:
Earnings Spread = (Total Interest Income / Total Earnings
Assets) – (Total Interest Expenses / Total Interest Bearing
Liabilities)
Earnings Spread = ($50 / $830) – ($38 / $650)
Earnings Spread = 0.0602 – 0.0585
Earnings Spread = 0.0017 or 0.17%
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