Bank & Financial Institution Modeling

Quick Reference Projecting Financial Statements for a Bank

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Commercial Bank Balance Sheet: How to Project Balance Sheet Line Items:
Assets:
+ Cash & Deposits with Banks % of Deposits on Liabilities Side
+ Federal Funds Sold Balancer; Increase if Assets < Liabilities & SE
+ Securities and/or Securities Borrowed % Growth Rate or % Deposits
+ Trading Assets % Growth Rate
+ Gross Loans Project Loan Portfolio or Simple % Growth Rate
Allowance for Loan Losses Add Provisions for CLs, Subtract Net Charge-Offs
= Net Loans
+ Accrued Interest & Accounts Receivable % Gross Loans
+ Premises & Equipment Add CapEx, Subtract D&A
+ Goodwill Hold Constant
+ Mortgage Servicing Rights Add MSR Origination, Subtract IS Mort. Fees & Inc.
+ Other Intangible Assets Subtract Scheduled Amortization
+ Other Assets % Growth Rate or % Deposits
= Total Assets

Liabilities:
+ Deposits % Gross Loans
+ Federal Funds Purchased Balancer; Increase if Liabilities & SE < Assets
+ Commercial Paper & Short-Term Borrowing % Gross Loans
+ Trading Liabilities % Trading Assets
+ Accounts Payable & Other Liabilities % Gross Loans
+ Beneficial Interests / Other Hold Constant or Simple Growth %
+ Long-Term Debt % Gross Loans
= Total Liabilities

Shareholders Equity (SE):

+ Preferred Stock Add Issuances, Subtract Redemptions
+ Common Stock Hold Constant
+ Additional Paid-In Capital Add Stock Issuances & Stock-Based Comp.
+ Treasury Stock Subtract Stock Repurchases
+ Accumulated Other Comprehensive Income Add Misc. Items and FX Effects
+ Retained Earnings Add Net Income, Subtract All Dividends
= Total Liabilities + SE
 Bank & Financial Institution Modeling
Quick Reference Projecting Financial Statements for a Bank

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Interest-Earning Assets, Interest-Bearing
Liabilities & Net Interest Income:
Assets:
+ Deposits with Banks
+ Federal Funds Sold
+ Securities and/or Securities Borrowed
+ Trading Assets Debt Only
+ Gross Loans
+ Other Interest-Earning Assets
= Total Interest-Earning Assets
How to Project IEA, IBL & Net Interest Income:
Flows in from Balance Sheet
Flows in from Balance Sheet
Flows in from Balance Sheet
% Total Trading Assets
Flows in from Balance Sheet
% Other Assets

Liabilities:
+ Interest-Bearing Deposits % Total Deposits
+ Federal Funds Purchased Flows in from Balance Sheet
+ Commercial Paper Flows in from Balance Sheet
+ Other Borrowings & Liabilities % Other Borrowings, AP, & Other Liabilities
+ Beneficial Interests Flows in from Balance Sheet
+ Long-Term Debt Flows in from Balance Sheet
= Total Interest-Bearing Liabilities

+ Average Interest on IEA Add Interest Spread to Average Interest on IBL

+ Average Interest on IBL Use Equity Research / Keep in Same Range
= Interest Rate Spread Use Equity Research / Keep in Same Range

+ Interest Income IEA Interest * AVERAGE (Beginning and Ending IEA)

Interest Expense IBL Interest * AVERAGE (Beginning and Ending IBL)
= Net Interest Income
 Bank & Financial Institution Modeling
Quick Reference Projecting Financial Statements for a Bank

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Commercial Bank Income Statement: How to Project Income Statement Line Items:

Non-Interest Revenue:
+ Investment Banking Fees % Growth Rate
+ Principal Transactions % Trading Assets or % Trading Liabilities
+ Securities Gains / (Losses) Assume $0 or Hold Constant
+ Lending and Deposit Fees % (Gross Loans + Deposits)
+ Asset Management % Assets Under Supervision or % Growth
+ Mortgage Fees & Income % Mortgage & Home Equity Loans
+ Credit Card Income % Credit Card Loans
+ Other Income % Growth Rate or Hold Constant
= Total Non-Interest Revenue

+ Interest Income Flows in from IEA / IBL Projections

Interest Expense Flows in from IEA / IBL Projections
= Net Interest Income

Total Net Revenue

Provision for Credit Losses % Gross Loans
Non-Interest Expenses % Net Revenue; Link Amortization to Schedule
= Pre-Tax Income

Taxes Assume Effective Tax Rate Based on Historical Data

+ Extraordinary Gains / Discontinued Ops. Assume $0 in Projected Periods
= Net Income
Preferred Stock Dividends % Preferred Stock or Hold Constant
= Net Income to Common

Basic Shares Link to Dividend / Stock Schedule (Circular)

= Basic EPS

* Dividend Payout Ratio Link to Tier 1 / Tier 1 Common Requirements and

= Dividends Per Common Share Work Backwards to Calculate Dividends
 Bank & Financial Institution Modeling
Quick Reference Projecting Financial Statements for a Bank
Commercial Bank Cash Flow Statement:
Cash Flow from Operations:
+ Net Income
+ Provision for Credit Losses
+ Depreciation
+ Amortization of Intangibles
+ Stock-Based Compensation
+ Deferred Income Taxes
Increase in Securities on BS
+ Net Change in Current Assets / Liabilities
= Cash Flow from Operations (CFO)
Cash Flow from Investing:
Increase in Deposits with Banks
Increase in Federal Funds Sold
(Increase in Gross Loans) Net Charge-Offs
+ Proceeds from Sales & Maturities
Capital Expenditures
= Cash Flow from Investing (CFI)
Cash Flow from Financing:
+ Increase in Deposits
+ Increase in Federal Funds Purchased
+ Increase in Commercial Paper & ST Borrowing
+ Increase in Beneficial Interests
+ Increase in Long-Term Debt
+ Common Stock Issued / (Repurchased)
+ Preferred Stock Issued / (Redeemed)
Common and Preferred Dividends
= Cash Flow from Financing (CFF)
+ Exchange Rate Effects (FX)
Net Change in Cash = CFO + CFI + CFF + FX
(Equals BS Ending Cash But Does NOT Flow In)
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How to Project Cash Flow Statement Line Items:
Flows in from Income Statement
Flows in from Income Statement
% Revenue
Projected in Companys Filings
% Revenue
Assume $0 or Use Book / Cash Tax Schedule
Flows in from Balance Sheet
Flows in from Balance Sheet; Review Company Filings
for Exact Items to List Here
Flows in from Balance Sheet
Flows in from Balance Sheet
Flows in from Balance Sheet & LLR Schedule
Assume $0 or Hold Constant
% Revenue
Flows in from Balance Sheet
Flows in from Balance Sheet
Flows in from Balance Sheet
Flows in from Balance Sheet
Flows in from Balance Sheet
Tied to Tier 1 Capital; Use Dividend / Stock Schedule
Assume $0 or Hold Constant
Tied to Tier 1 Capital; Use Dividend / Stock Schedule
Assume $0 or Hold Constant
 Bank & Financial Institution Modeling
Quick Reference Projecting Financial Statements for a Bank

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Commercial Bank Dividends & Stock Schedule:
+ Available Tier 1 Common
Minimum Tier 1 Common Required
= Capital Avail. for Dividends / Repurchases
How to Project Dividend & Stock Line Items:
= Last Year Common Equity + NI to Common + FX
Effect + SBC + Stock Issuances Goodwill, Intangibles
& Other Tier 1 Adjustments
Risk-Weighted Assets * Minimum Tier 1 Common
= MAX(Avail. Tier 1 Comm. Min. Tier 1 Comm., 0)

Basic EPS Flows in from Income Statement

* Dividend Payout Ratio Assume Constant or Match Historical Ratios
= Dividends Per Share
* Basic Shares Flows in from Income Statement
= Potential Common Dividends

Allowed Common Dividends = MIN(Capital Avail., Potential Common Dividends)

Capital Available for Stock Repurchases Capital Avail. Allowed Common Dividends
Stock Repurchases Planned Use Equity Research or Hold Constant
Allowed Stock Repurchases =MIN(Capital Avail. for Repurchases, Rep. Planned)

Basic Shares Old Basic Shares + Net Change in Basic Shares

Diluted EPS Flows in from Income Statement
* Trailing P/E Multiple Decline Each Year from Last Historical P/E
= Implied Future Stock Price

# Shares Repurchased Allowed Stock Repurchases / Future Stock Price

+ # Shares Issued Stock Issuances from CFS / Future Stock Price
= Net Change in # Basic Shares

+ Dilution from Options / Warrants Use TSM with Option / Warrant Counts, Exercise
Prices, and Implied Future Stock Prices

+ Dilution from Restricted Stock Units Hold Constant

= Net Dilution

Diluted Shares Outstanding Basic Shares + Net Dilution