Chapter 05

Problem 01

Input Area:

Report of Condition
Total assets 4,000.00
Cash and due from depository institutions 90.00
Securities 535.00
Federal funds sold & reverse repurchase agreements 45.00
Gross loans & leases ?
Loan loss allowance 200.00
Net loans and leases 2,700.00
Trading account assets 20.00
Bank premises and fixed assets ?
Other real estate owned 15.00
Goodwill and other intangibles 200.00
All other assets 175.00
Total liabilities and capital ?
Total liabilities ?
Total deposits ?
Federal funds purchased & repurchase agreements 80.00
Trading liabilities 10.00
Other borrowed funds 50.00
Subordinated debt 480.00
All other liabilities 40.00
Total Equity capital ?
Perpetual preferred stock 5.00
Common stock 25.00
Surplus 320.00
Undivided profits 70.00

Output Area:

Gross loans & leases 2,900.00

Bank premises and fixed assets 220.00
Total liabilities and capital 4,000.00
Total liabilities 3,580.00
Total deposits 2,920.00
Total Equity capital 420.00
Chapter 05
Problem 02

Input Area:

Report of Income

Total interest income 200.00

Total interest expense ?
Net interest income 60.00
Provision for loan and lease losses ?
Total noninterest income 100.00
Fiduciary activities 20.00
Service charges on deposit accounts 25.00
Trading account gains & fees ?
Additional noninterest income 30.00
Total noninterest expense 125.00
Salaries and employee benefits ?
Premises and equipment expense 10.00
Additional noninterest expense 20.00
Pre-tax net operating income 15.00
Securities gains (losses) 5.00
Applicable income taxes 3.00
Income before extraordinary items ?
Extraordinary gains - net 2.00
Net income ?

Output Area:

Total interest expense 140.00

Provision for loan and lease losses 20.00
Trading account gains & fees 25.00
Salaries and employee benefits 95.00
Income before extraordinary items 17.00
Net income 19.00
Chapter 05
Problem 03

Input Area:

Total interest income $140

Total interest expenses $100
Total noninterest income $75
Total noninterest expenses $90
Provision for loan losses $5
Income taxes $4
Increases in bank’s undivided profits $6

Output Area:

Net interest income $40

Net noninterest income -$15
Pretax net operating income $20
Net income after taxes $16
Total operating revenues $215
Total operating expenses $195
Dividends to common stockholders $10
Chapter 05
Problem 04

Input Area:
Gross loans $300
Allowance for loan losses $15
Investment Securities $36
Common stock $5
Surplus $15
Total equity capital $30
Cash and due from banks $10
Miscellaneous assets $25
Bank premises and equipment, gross $25
Trading-account securities $2
Other real estate owned $4
Goodwill and other intangibles $3
Total liabilities $375
Preferred stock $3
Nondeposit borrowings $40
Bank premises and equipment, net $20

Output Area:

Total assets $405

Net loans $285
Undivided profits $7
Fed Funds Sold $20
Depreciation $5
Total deposits $335
Chapter 05
Problem 05

Input Area:
Gross loans $800
Allowance for loan losses $45
Original Loan Amount $12
Amount Repaid $2
Market Value of Real Estate $7
Auction Value of Real Estate (part c) $10

Output Area:

Outstanding Loan Balance $10

Net Loans before charge-off $755
Amount of charge-off $3
Gross Loans after charge-off $797
ALL after charge-off $42
Net Loans after charge-off $755
Gross Loans after auction $790
ALL after after auction (recovery) $45
Net Loans after auction (recovery) $745
Chapter 05
Problem 08

Input Area:

Off-balance-sheet items for Nitty Gritty Bank (in millions of $)

Total unused commitments $8,000
Standby letters of credit and foreign office guarantees $1,350
(Amount conveyed to others) -$50
Commercial letters of credit $60
Securities lent $2,200
Derivatives(total) $100,000
Notional amount of credit derivatives: $22,000
Interest rate contracts $54,000
Foreign Exchange rate contracts
Contracts on other commodities and equities $1,200
All other off-balance sheet liabilities $49
Total off-balance-sheet items
Total assets (on-balance sheet) $12,000

Output Area:

Foreign exchange rate contracts $22,800

Total off-balance-sheet items $111,609
Off-balance-sheet assets/ on-balance sheet assets 930.08%
Chapter 05
Problem 09

Input Area:

Effective tax rate 28%

Interest on loans 90.00
Employee wages, salaries, and benefits 13.00
Interest earned on government bonds and notes 9.00
Provision for loan losses 5.00
Overhead expenses 3.00
Service charges paid by depositors 3.00
Security gains/losses -7.00
Interest paid on federal funds purchased 5.00
Payment of dividends of $4 per share on 1 million outstanding shares to
be made to common stockholders 4.00
Interest paid to customers holding time and savings deposits 40.00
Trust department fees 3.00

Output Area:
Report of Net Income
Interest income 99.00
Interest on loans 90.00
Interest earned on government bonds and notes 9.00
Interest expense 45.00
Interest paid on federal funds purchased 5.00
Interest paid to customers holding time and savings deposits 40.00
Net Interest income 54.00
Noninterest income 6.00
Service charges paid by depositors 3.00
Trust department fees 3.00
Noninterest expense 16.00
Employee wages, salaries, and benefits 13.00
Overhead expenses 3.00
Net nonInterest Income -10.00
Provision for loan losses 5.00
Pretax operating income 39.00
Taxes paid 10.92
Security gains -7.00
Net income 21.08
Dividends paid 4.00
Addition to Retained Earning 17.08
Chapter 05
Problem 11

Input Area:

Net interest income $800

Net noninterest income -$500
Security Gains $100
Increases in bank's undivided profits $200

Total interest expense as a % of total interest income 50.00%

Noninterest income as a % of noninterest expense 75.00%
Loan losses as a % of total interest income 3.00%

Tax Rate 30.00%

Output Area:

Net interest income as a % of total interest income 50.00%

Total interest income 1,600.00
Total interest expenses 800.00
Total noninterest income 1,500.00
Total noninterest expenses 2,000.00
Provision for loan losses 48.00
Pre-tax net operating income 252.00
Income taxes 105.60
Dividends paid to common stockholders 46.40