The financial statements for THE Bank are shown below: Balance Sheet THE Bank Assets Liabilities and Equity Cash $ 260 Demand deposits $ 2,510 Demand...

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Finance

The financial statements for THE Bank are shown below:
Balance Sheet THE Bank
Assets Liabilities and Equity
Cash $ 260 Demand deposits $ 2,510
Demand deposits from other FIs 660 Small time deposits 4,860
Investments 1,860 Jumbo CDs 1,485
Federal funds sold 960 Federal funds purchased 1,060
Loans 6,960 Equity 895
Reserve for loan losses (700 )
Premises 810
Total assets $ 10,810 Total liabilities/equity $ 10,810
Income Statement THE Bank
Interest income $ 2,470
Interest expense 1,690
Provision for loan losses 110
Noninterest income 300
Noninterest expense 470
Taxes 40

a. Calculate THE Bank’s earning assets.
b. Calculate THE Bank’s ROA. (Round youranswer to 3 decimal places. (e.g., 32.161))
c. Calculate THE Bank’s total operatingincome.
d. Calculate THE Bank’s spread. (Do notround intermediate calculations. Round your answer to 3 decimalplaces. (e.g., 32.161))

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3.6 Ratings (428 Votes)

Ans. A	Earning assets = Investments + Federal funds sold + Loans - Reserve for loan losses
	$1,860 + $960 + $6,960 - $700
	$9,080

Ans. B	ROA = Net return - Total assets * 100
	$460 / $10,810 * 100
	4.255%

	*Calculation of Net return:
	Particulars	Amount
	Interest income	$2,470
	Add: Non interest income	$300
	Total income (a)	$2,770
	Less: Expenses
	Interest expenses	$1,690
	Provision for loan losses	$110
	Non interest expenses	$470
	Tax	$40
	Total expenses (b)	$2,310
	Net revenue (a-b)	$460

Ans. C	Total operating income = Interest income + Non interest income
	$2,470 + $300
	$2,770

Ans. d	Calculations of Interest bearing liabilities :

	Small time deposits	$4,860
	Jumbo CDs	$1,485
	Federal funds purchased	$1,060
	Total	$7,405

	Spread = (Interest income / Earnings assets) - (Interest expenses / Interest bearing liabilities)
	($2,470 / $9,080) - ($1,690 / $7,405)
	0.2720 - 0.2282
	0.0438
	or 4.380%

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Transcribed Image Text

The financial statements for THE Bank are shown below:Balance Sheet THE BankAssetsLiabilities and EquityCash$260Demand deposits$2,510Demand deposits from other FIs660Small time deposits4,860Investments1,860Jumbo CDs1,485Federal funds sold960Federal funds purchased1,060Loans6,960Equity895Reserve for loan losses(700)Premises810Total assets$10,810Total liabilities/equity$10,810Income Statement THE BankInterest income$2,470Interest expense1,690Provision for loan losses110Noninterest income300Noninterest expense470Taxes40a. Calculate THE Bank’s earning assets.b. Calculate THE Bank’s ROA. (Round youranswer to 3 decimal places. (e.g., 32.161))c. Calculate THE Bank’s total operatingincome.d. Calculate THE Bank’s spread. (Do notround intermediate calculations. Round your answer to 3 decimalplaces. (e.g., 32.161))

Balance Sheet THE Bank
Assets				Liabilities and Equity
Cash	$	260		Demand deposits	$	2,510
Demand deposits from other FIs		660		Small time deposits		4,860
Investments		1,860		Jumbo CDs		1,485
Federal funds sold		960		Federal funds purchased		1,060
Loans		6,960		Equity		895
Reserve for loan losses		(700	)
Premises		810
Total assets	$	10,810		Total liabilities/equity	$	10,810

Income Statement THE Bank
Interest income	$	2,470
Interest expense		1,690
Provision for loan losses		110
Noninterest income		300
Noninterest expense		470
Taxes		40