1, Jasper National Bank has just submitted its Report of Condition to the FDIC.

Please fill in the

missing items from its statement shown below (all figures in millions of dollars):

Report of Condition
Total assets $2,500
Cash and due from Depository 87
Institutions
Securities 233
Federal Funds Sold and Reverse 45
Repurch.
Gross Loans and Leases ? 1,900 * Gross Loans and Leases = Net Loans and
Leases+
Loan Loss Allowance 200 Loan Loss Allowance
Net Loans and Leases 1700
Trading Account Assets 20
Bank Premises and Fixed Assets ? 25 *This is the only asset missing and so is total
assets
less all of the rest of the assets listed here
Other Real Estate Owned 15
Goodwill and Other Intangibles 200
All Other Assets 175
Total Liabilities and Capital ? 2,500 *Total Liabilities and Capital = Total assets
Total Liabilities 2,260 * Total Liabilities = Total Liabilities and Capital-
? Total Equity Capital
Total Deposits ? 1,600 *Total Deposits = Total Liabilities Less All of the
Other Liabilities
Federal Funds Purchased and Repurchase 80
Agreements.
Trading Liabilities 10
Other Borrowed Funds 50
Subordinated Debt 480
All Other Liabilities 40
Total Equity Capital ? 240 Total Equity Capital = Perpetual Preferred Stock
+Common Stock+Surplus+Undivided Profit
Perpetual Preferred Stock
2
Common Stock 24
Surplus 144
Undivided Profit 70
2. Along with the Report of Condition submitted above, Jasper has also prepared a Report
of Income for the FDIC. Please fill in the missing items from its statement shown below (all
figures in millions of dollars):

Report of Income

Total Interest Income $120

Total Interest Expense ? * Total Interest Expense = Total Interest
80 Income - Net Interest Income
Net Interest Income 40
Provision for Loan and Lease Losses ? * Provision for Loan and Lease Losses =
4 Net Interest Income + Total Noninterest
Income - Total Noninterest Expense -
Pretax Net Operating Income
Total Noninterest Income 58
Fiduciary Activities 8
Service Charges on Deposit 6
Accounts
Trading Account Gains and Fees ? 14 * There are four areas of Total Noninterest
Income and only one is missing and the
total
is given
Additional Noninterest Income 30
Total Noninterest Expense 77
Salaries and Benefits ? 47 *There are three areas of Total Noninterest
Expense and only one is missing and the
total
is given
Premises and Equipment Expense 10
Additional Noninterest Expense 20
Pretax Net Operating Income 17
Securities Gains (Losses) 1
Applicable Income Taxes 5
Income Before Extraordinary Income ? 13 *Pretax Income Plus Security Gains Less
Taxes is income before extraordinary
income
Extraordinary Gains – Net 2
Net Income ? 15 * Net Income = Income Before
Extraordinary Income + Extraordinary`````
3. If you know the following figures:

Total Interest Income $140 Provision for Loan Loss $5

Total Interest Expenses 100 Income Taxes 5
Total Noninterest Income 15 Increases in bank’s undivided profits 6
Total Noninterest Expenses 35

Please calculate these items:

Net Interest Income 40 *Total Interest Income Less Total Interest Expense
Net Noninterest Income -20 *Total Noninterest Income Less Total Noninterest
Expense
Pretax net operating income 15 *Net Interest Income Plus Net Noninterest Income
Less PLL
Net Income After Taxes 10 *Pretax net operating income less PLL less Taxes
Total Operating Revenues 155 *Interest Income Plus Noninterest Income
Total Operating Expenses 140 *Interest Expenses Plus Noninterest Expenses Plus
PLL
Dividends paid to Common 4 Net Income After Taxes Less Increases in bank’s
Stockholders undivided profits

4. If you know the following figures:

Gross Loans $275 Trading Account Securities $2

Allowance for Loan Losses 5 Other Real Estate Owned 4
Investment Securities 36 Goodwill and other Intangibles 3
Common Stock 5 Total Liabilities 375
Surplus 19 Preferred Stock 3
Total Equity Capital 39 Nondeposit Borrowings 20
Cash and Due from Banks 9 Bank Premises and Equipment, 29
Net
Miscellaneous Assets 38
Bank Premises and Equipment, 34
Gross

Please calculate these items:

Total Assets 414 *Total Liabilities Plus Total Equity Capital

Net Loans 270 *Gross Loans Less ALL
Undivided Profit 12 *Total Equity Capital less PS less CS Less
Surplus
Fed funds sold 23 *This is the only asset missing so subtract all
other
assets from total assets
Depreciation 5 * Bank Premises and Equipment, Gross less Bank
Premises and Equipment, Net
Total Deposits 355 *Total Liabilities less Nondeposit Borrowings
 5. A bank has $200 million in assets in the 0 percent risk-weight category. It has $400 million in
assets in the 20 percent risk-weight category. It has $1000 million in assets in the 50 percent risk-
weight category and has $1000 million in assets in the 100 percent risk-weight category. This
bank has $96 million in Tier 1 capital and $48 million in Tier 2 capital. What is this bank's ratio
of Tier 2 capital to risk assets?
A) 6.08 percent
B) 3.04 percent
C) 9.11 percent
D) 5.54 percent
E) None of the above
Answer: B

6. A bank has $200 million in assets in the 0 percent risk-weight category. It has $400 million in
assets in the 20 percent risk-weight category. It has $1000 million in assets in the 50 percent risk-
weight category and has $1000 million in assets in the 100 percent risk-weight category. This
bank has $96 million in Tier 1 capital and $48 million in Tier 2 capital. What is this bank's ratio
of total capital to risk assets?
A) 6.08 percent
B) 3.04 percent
C) 9.11 percent
D) 5.54 percent
E) None of the above
Answer: C

7. A bank has $100 million in assets in the 0 percent risk weight category, $200 million in assets in the 20
percent risk weight category, $500 million in assets in the 50 percent risk weight category and $750
million in assets in the 100 percent risk weight category. This bank has $57 million in core (Tier 1)
capital. What is this bank's ratio of Tier 1 capital to risk-weighted assets?
A) 3.68 percent
B) 7.6 percent
C) 18.25 percent
D) 5.48 percent
E) None of the above
Answer: D
8. A bank estimates that its total revenues will amount to $155 million and its total expenses
(including taxes) will equal $107 million this year. Its liabilities total $4,960 million while its
equity capital amounts to $52 million. What is the bank's return on assets? Is this ROA high or
low? How could you find out?

The bank's return on assets would be:

ROA = Net Income = $155 mill. - $107 mill. = 0.0096 or 0.96 percent
Total Assets $4,960 mill. + $52 mill.
9. Suppose a bank reports that its net income for the current year is $51 million, its assets total
$1,144 million, and its liabilities amount to $926 million. What is its return on equity capital? Is
the ROE you have calculated good or bad? What information do you need to answer this last
question?
 The bank's return on equity capital should be:

ROE = Net Income = $51 million = 0.234 or 23.39 percent

Total equity Capital $1,144 mill.-$926 mill.

In order to evaluate the performance of the bank, you have to compare the ROE to the ROE of
some major competitors or some industry average.

10. The latest report of condition and income and expense statement for Happy Merchants
National Bank are as shown in the following tables:
Happy Merchants National Bank
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 expense 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

Happy Merchants National Bank

Report of Condition
Assets Liabilities
Cash and 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
Surplus 25
Total assets 980 Retained earnings 35
Total Capital 80
Total Earnings Assets 830 Interest-bearing deposits 650
Fill in the missing items on the income and expense statement. Using these statements, calculate the
following performance measures:

1. ROE
2. Asset utilization
3. ROA
4. Equity multiplier
5. Net interest margin
6. Net noninterest margin
7. Net operating margin
8. Net profit margin

What strengths and weaknesses are you able to detect in Happy Merchants’ performance?