1

Fin 460: Management of Financial Institutions.

Student Name

Course

Institution

Date
FIN 460: MANAGEMENT OF FINANCIAL INSTITUTIONS 2

Fin 460: Management of Financial Institutions.

Table of Contents
Identify the type of bank...........................................................................................................................3
Which regulatory agency governs them?.................................................................................................3
What are the Banks Focus?......................................................................................................................3
Calculate and show work by attaching exhibits......................................................................................4
Insights from the calculations...................................................................................................................5
Strengths and Weaknesses........................................................................................................................5
References...................................................................................................................................................7
Appendix....................................................................................................................................................8
FIN 460: MANAGEMENT OF FINANCIAL INSTITUTIONS 3

Fin 460: Management of Financial Institutions.

Identify the type of bank.

Colorado Bank and Trust Company of La Junta is headquartered in Pueblo, CO, USA.

The bank belongs to the banking and credit unions industry, with about thirty employees at this

specific location (Dun & Bradstreet, 2021). The bank belongs to the bank charter class SM

together with Mountain Valley Bank, and the Gunnison Bank and Trust Company. All these

banks have average total assets below 2 billion dollars. Mountain valley, Gunnison, and

Colorado banks have 147.22 million dollars, 84.214 million dollars and 181.260 million dollars

in total assets.

Which regulatory agency governs them?

Banks and bank holding companies in the United States are regulated, supervised, and

their operations are overseen by both the Federal government and the state law from which they

operate from. Regulatory agencies are often formed to protect the respective bank's customers

and stakeholders. All these banks are required to file SEC annual reports for their activities

during the previous financial year. The operations of all these banks are often limited. The

Federal Deposit Insurance Corporation (FDIC) regulates all these bank's functions, including the

required minimal assets. Besides, Colorado Bank & Trust Company is regulated by the Federal

Financial Institutions Examination Council (FFIEC). This is an adherence to the online banking

standards.

What are the Banks Focus?

The bank's primary focus is providing both commercial and deposits. Colorado Bank and

Trust Company values its customers and attends to every customers' needs and complaints as
FIN 460: MANAGEMENT OF FINANCIAL INSTITUTIONS 4

they arise (Colorado Bank & Trust Company, 2021). Besides, the banks offer online banking and

bill payments, check writing, statements and Visa Debit Card. In other words, the bank provides

services for both personal clients and corporate clients. The banks offer services related to

individual savings accounts, money market accounts and business accounts.

Calculate and show work by attaching exhibits

 ROE = net income/equity on capital

 ROA = net income / total assets

 Net Interest Margin = (interest Income-interest expense)/total assets

 Net Noninterest Margin = operating income/total assets

 Net Operating Margin = (noninterest revenues-provision for loan lease losses-noninterest

expenses)/total assets

Table 1: Calculations for the above are attached below and available in excel.

Mountain Gunnison & Colorado Bank &

  Valley Trust Trust
ROA 0.49% 0.91% 1.93%
ROE 4.31% 9.63% 19.09%
Net Interest Margin 3.31% 4.21% 3.90%
Net Noninterest Margin -2.54% -2.79% -3.03%
Net Operating Margin 0.54% 0.91% 2.47%
       
Net Assets 147222000 84214000 181260
Net Income 726000 764000 3502
Equity 16852000 7930000 18,346
Interest Income 5154000 3745000 7190
Interest Expense 286000 200000 128
Operating Income 802000 764000 4477
Noninterest revenues 802000 846000 3774
Provision for Loan Lease 252000 12000 3580
Noninterest expenses 4290000 3182000 5684
Source: (Excel Analysis)
FIN 460: MANAGEMENT OF FINANCIAL INSTITUTIONS 5

Insights from the calculations

Return on Equity is used to measure the bank’s ability to generate revenue with the

shareholder equity capital. Similarly, Return on Assets is used to ascertain the profitability or the

efficiency of the bank in using its assets to generate profit. On the other hand, the net interest

margin is used in measuring the difference existing between revenues and expenses coming from

the interests. As shown in table 1, Colorado Bank and Trust Company have a better ROA, ROE

and Net operating margin than its peers. Therefore, the bank seems to be performing well.

However, the bank is not doing well about net interest margin and net noninterest margin.

Strengths and Weaknesses

Return on Assets is a strength to Colorado Bank and Trust company. Colorado Bank and

Trust Company have a ROA of 1.93 per cent better than Mountain Valley and Gunnison, both

with a ROA of 0.49 and 0.91 per cent, respectively. This shows that Colorado bank is doing well

in utilizing its assets to attain profits. However, this ratio is too low. Therefore, the bank should

minimize a lot of expenses that are bringing the net income low.

Additionally, Net Operating Margin is a strength to the bank. The bank recorded a net

operating margin of 2.47 compared to 0.54 and 0.91 per cent recorded by both Mountain Valley

and Gunnison Banks. This indicates that Colorado bank is more profitable than its competitors.

Net Interest margin is a weakness to the bank. Colorado Bank and Trust came in second

with a 3.90 per cent net interest margin. As seen, this is below Gunnison Bank’s net interest

margin of 4.21 per cent. This indicates that the bank is not as profitable as Gunnison bank when

it comes to its investments. Therefore, the bank needs to apply funds towards outstanding debts

and utilize its assets well in more profitable investments (Bloomethal & Kindness, 2021).
FIN 460: MANAGEMENT OF FINANCIAL INSTITUTIONS 6

Net noninterest margin is also a weakness for Colorado Bank and Trust Company. The

bank recorded -3.03 per cent below Gunnison and Mountain Valley banks. This indicates that the

bank is spending too much on wages and salaries and the bank’s maintenance. Therefore, the

bank should minimize its expenses on casual wages and unnecessary maintenance.
FIN 460: MANAGEMENT OF FINANCIAL INSTITUTIONS 7

References

BLOOMENTHAL, A., & KINDNESS, D. (2021). Net Interest Margin. Investopedia. Retrieved

23 April 2021, from

https://www.investopedia.com/terms/n/netinterestmargin.asp#:~:text=Simply%20put

%3A%20a%20positive%20net,assets%20towards%20more%20profitable

%20investments.

Colorado Bank & Trust Company. (2021). The Colorado Bank & Trust Company.

Colobank.com. Retrieved 23 April 2021, from https://www.colobank.com/.

Dun & Bradstreet. (2021). Retrieved 23 April 2021, from https://www.dnb.com/business-

directory/company-

profiles.colorado_bank_and_trust_company_of_la_junta.bd6ede2021f9ccebbcc2484be0e

99d34.html.
FIN 460: MANAGEMENT OF FINANCIAL INSTITUTIONS 8

Appendix

Exhibits – Gunnison Bank

All Insured
The Gunnison Bank
Income Statement Commercial Banks
And Trust Company
in Colorado
All Insured
The Gunnison Bank
Income Statement Commercial Banks
And Trust Company
in Colorado
Interest and Fees on Loans 3,356 12,058
Income from Lease Financing Receivables — 15
— 86
Estimated Tax Benefit from Tax-Exempt Loan Income — 44
Income on Loans and Leases (TE) 3,356 12,124
Investment Interest Income (TE) 266 1,943
Total Interest Income (TE) 3,745 14,428
Total Interest Expense 200 901
Net Interest Income (TE) 3,545 13,487
Non-Interest Income 846 4,327
Adjusted Operating Income (TE) 4,391 18,392
Non-interest Expense 3,182 12,555
Provision for Loan & Lease Losses 12 237
Pretax Operating Income (TE) 1,197 5,288
Pretax Net Operating Income (TE) 1,214 5,374
Applicable Income Taxes 429 823
Net Operating Income 764 4,034
Net Income 764 4,034
Cash Dividends Declared 300 1,590
Retained Earnings 464 2,176
FIN 460: MANAGEMENT OF FINANCIAL INSTITUTIONS 9

Exhibit 2 – Mountain Valley

All Insured
Mountain Valley
Income Statement Commercial Banks
Bank, N.A.
in West Virginia
All Insured
Mountain Valley
Income Statement Commercial Banks
Bank, N.A.
in West Virginia
Interest and Fees on Loans 4,552 11,666
Income from Lease Financing Receivables — 1
11 100
Estimated Tax Benefit from Tax-Exempt Loan Income 6 47
Income on Loans and Leases (TE) 4,558 11,724
Investment Interest Income (TE) 575 1,523
Total Interest Income (TE) 5,154 13,460
Total Interest Expense 286 1,601
Net Interest Income (TE) 4,868 11,860
Non-Interest Income 802 3,481
Adjusted Operating Income (TE) 5,670 15,431
Non-interest Expense 4,290 10,280
Provision for Loan & Lease Losses 252 502
Pretax Operating Income (TE) 1,128 4,739
Pretax Net Operating Income (TE) 1,130 4,910
Applicable Income Taxes 314 1,424
Net Operating Income 726 3,265
Net Income 726 3,285
Cash Dividends Declared 397 1,194
Retained Earnings 329 1,335

Exhibit 3 – Colorado Bank

FIN 460: MANAGEMENT OF FINANCIAL INSTITUTIONS 10

Colorado Bank & Trust Company Of La Junta, The

Schedule RI Income Statement

Quarter Ended:2020-12-31
Updated :2021-01-28

(USD, in thousands)

2020-01-01
2020-12-31

Interest income:
Interest and fee income on loans:
Loans secured by real estate:
Loans secured by 1-4 family residential properties 1,344
All other loans secured by real estate 3,160
Commercial and industrial loans 1,092
Loans to individuals for household, family, and other personal expenditures:
Credit cards 21
Other (includes revolving credit plans other than credit cards, automobile loans, 332
and other consumer loans)
All other loans** 427
Total interest and fee income on loans 6,376
Income from lease financing receivables 0
Interest income on balances due from depository institutions*** 115
Interest and dividend income on securities:
U.S. Treasury securities and U.S. Government agency obligations (excluding 681
mortgage backed securities)
Mortgage backed securities 0
All other securities (includes securities issued by states and political subdivisions in 0
the U.S.)
Interest income on federal funds sold and securities purchased under agreements to 0
resell
Other interest income 18
Total interest income 7,190
Interest expense:
Interest on deposits:
Transaction accounts (interest-bearing demand deposits, NOW accounts ATS 4
accounts, and telephone and preauthorized transfer accounts)
Nontransaction accounts:
Savings deposits (includes MMDAs) 32
Time deposits of $250,000 or less 78
Time deposits of more than $250,000 14
Expense of federal funds purchased and securities sold under agreements to 0
repurchase
Interest on trading liabilities and other borrowed money 0
Interest on subordinated notes and debentures 0
Total interest expense 128
Net interest income 7,062
Provision for loan and lease losses(Institutions that have adopted ASU-2016-13 should 680
report the provisions for credit losses on all financial assets that fall within the scope of
the standard)
Noninterest income:
Income from fiduciary activities**** 348
Service charges on deposit accounts 2,480
Trading revenue***** 0
Fees and commissions from securities brokerage 0
FIN 460: MANAGEMENT OF FINANCIAL INSTITUTIONS 11

Investment banking, advisory, and underwriting fees and commissions 0

Fees and commissions from annuity sales 0
Underwriting income from insurance and reinsurance activities 0
Income from other insurance activities 10
Venture capital revenue 0
Net servicing fees 613
Net securitization income 0
Net gains (losses) on sales of loans and leases 0
Net gains (losses) on sales of other real estate owned 224
Net gains (losses) on sales of other assets 11
Other noninterest income* 88
Total noninterest income 3,774
Realized gains (losses) on held to maturity securities 0
Realized gains (losses) on available for sale securities 5
Noninterest expense:
Salaries and employee benefits 3,736
Expenses of premises and fixed assets (net of rental income) (excluding salaries and 521
employee benefits and mortgage interest)
Goodwill impairment losses 0
Amortization expense and impairment losses for other intangible assets 0
Other noninterest expense* 1,427
Total noninterest expense 5,684
Income (loss) before unrealized holding gains (losses) on equity securities not held for 4,477
trading, applicable income taxes, and discontinued operations
Unrealized holding gains (losses) on equity securities not held for trading 0
Income (loss) before applicable income taxes and discontinued operations 4,477
Applicable income taxes 975
Income (loss) before discontinued operations 3,502
Discontinued operations, net of applicable income taxes 0
Net income (loss) attributable to bank and noncontrolling (minority) interests 3,502
LESS: Net income (loss) attributable to noncontrolling (minority) interests 0
Net income (loss) attributable to bank 3,502
Memoranda
Interest expense incurred to carry tax exempt securities, loans, and leases acquired 0
after August 7, 1986, that is not deductible for federal income tax purposes
Income from the sale and servicing of mutual funds and annuities 0
Income on tax exempt loans and leases to states and political subdivisions in the U.S. 0
Income on tax exempt securities issued by states and political subdivisions in the U.S. 0
Number of full time equivalent employees at end of current period 41
Interest and fee income on loans to finance agricultural production and other loans to 426
farmers
If the reporting bank has restated its balance sheet as a result of applying push down 0
accounting this calendar year, report the date of the banks acquisition *******
Net gains (losses) recognized in earnings on credit derivatives that economically
hedge credit exposures held outside the trading account:
Net gains (losses) on credit derivatives held for trading 0
Net gains (losses) on credit derivatives held for purposes other than trading 0
To be completed by banks with $300 million or more in total assets:****** Credit 0
losses on derivatives
Does the reporting bank have a Subchapter S election in effect for federal income tax No
purposes for the current tax year?
Noncash income from negative amortization on closed-end loans secured by 1-4 0
family residential properties
Net gains (losses) recognized in earnings on assets and liabilities that are reported at
fair value under a fair value option:
Net gains (losses) on assets 0
Estimated net gains (losses) on loans attributable to changes in instrument- 0
specific credit risk
Net gains (losses) on liabilities 0
FIN 460: MANAGEMENT OF FINANCIAL INSTITUTIONS 12

Estimated net gains (losses) on liabilities attributable to changes in instrument- 0

specific credit risk
Other-than-temporary impairment losses on held-to-maturity and available-for-sale 0
debt securities recognized in earnings (included in Schedule RI)
Components of service charges on deposit accounts in domestic offices (to be
completed by institutions with $1 billion or more in total assets):
Consumer overdraft-related service charges levied on those transaction account and 0
nontransaction savings account deposit products intended primarily for individuals
for personal, household, or family use
Consumer account periodic maintenance charges levied on those transaction 0
account and nontransaction savings account deposit products intended primarily for
individuals for personal, household, or family use
Consumer customer automated teller machine (ATM) fees levied on those 0
transaction account and nontransaction savings account deposit products intended
primarily for individuals for personal, household, or family use
All other service charges on deposit accounts 0
* Describe on Schedule RI-E+Explanations

Colorado Bank & Trust Company Of La Junta, The

Schedule RC Balance Sheet

Quarter Ended:2020-12-31
Updated :2021-01-28

(USD, in thousands)

2020-12-31

ASSETS

Cash and balances due from depository institutions (from Schedule RC-A)

Noninterest bearing balances and currency and coin* 4,534

Interest bearing balances** 28,235

Securities:

Held to maturity securities (from Schedule RC-B) 0

Available for sale securities (from Schedule RC-B) 39,014

Equity securities with readily determinable fair values not held for trading 0

Federal funds sold and securities purchased under agreements to resell

Federal funds sold in domestic offices 0

Securities purchased under agreements to resell*** 0

FIN 460: MANAGEMENT OF FINANCIAL INSTITUTIONS 13

Loans and lease financing receivables (from Schedule RC-C):

Loans and leases held for sale 0

Loans and leases, net of unearned income 105,965

LESS: Allowance for loan and lease losses 3,580

Loans and leases, net of unearned income and allowance 102,385

Trading assets (from Schedule RC-D) 0

Premises and fixed assets (including capitalized leases) 2,414

Other real estate owned (from Schedule RC-M) 0

Investments in unconsolidated subsidiaries and associated companies (from Schedule 0

RC-M)

Direct and indirect investments in real estate ventures 0

Intangible assets 0

Other assets (from Schedule RC-F) 4,678

Total assets 181,260

LIABILITIES

Deposits:

In domestic offices 161,694

Noninterest bearing**** 94,490

Interest bearing 67,204

Federal funds purchased and securities sold under agreements to repurchase

Federal funds purchased in domestic offices***** 0

Securities sold under agreements to repurchase****** 0

Trading liabilities (from Schedule RC-D) 0

Other borrowed money (includes mortgage indebtedness and obligations under 0

capitalized leases)(from Schedule RC-M)

Subordinated notes and debentures******* 0

Other liabilities (from Schedule RC-G) 1,220

Total liabilities 162,914

EQUITY CAPITAL

Perpetual preferred stock and related surplus 0

Common stock 550

Surplus (exclude all surplus related to preferred stock) 1,000

Retained earnings 16,278

Accumulated other comprehensive income******** 518

FIN 460: MANAGEMENT OF FINANCIAL INSTITUTIONS 14

Other equity capital components********* 0

Total bank equity capital 18,346

Noncontrolling (minority) interests in consolidated subsidiaries 0

Total equity capital 18,346

Total liabilities and equity capital 181,260

Memorandum

To be reported with the March Report of Condition.

Bank's fiscal year-end date 0

Indicate in the box at the right the number of the statement below that best describes 0
the most comprehensive level of auditing work performed for the bank by
independent external auditors as of any date last year.

1a = An integrated audit of the reporting institution's financial statements and its

internal control over financial reporting conducted in accordance with the standards of
the American Institute of Certified Public Accountants (AICPA) or Public Company
Accounting Oversight Board (PCAOB) by an independent public accountant that submits
a report on the institution

1b = An audit of the reporting institution's financial statements only conducted in

accordance with the auditing standards of the AICPA or the PCAOB by an independent
public accountant that submits a report on the institution

2a = An integrated audit of the reporting institution's parent holding company's

consolidated financial statements and its internal control over financial reporting
conducted in accordance with the standards of the AICPA or the PCAOB by an
independent public accountant that submits a report on the consolidated holding
company (but not on the institution separately)

2b = An audit of the reporting institution's parent holding company's consolidated

financial statements only conducted in accordance with the auditing standards of the
AICPA or the PCAOB by an independent public accountant that submits a report on the
consolidated holding company (but not on the institution separately)

4 = Directors' examination of the bank conducted in accordance with generally accepted

auditing standards by a certified public accounting firm (may be required by state-
chartering authority)

5 = Directors' examination of the bank performed by other external auditors (may be

required by state-chartering authority)

6 = Review of the bank's financial statements by external auditors

7 = Compilation of the bank's financial statements by external auditors

8 = Other audit procedures (excluding tax preparation work)

9 = No external audit work

* Includes cash items in process of collection and unposted debits.

** Includes time certificates of deposit not held for trading.

*** Includes all securities resale agreements, regardless of maturity.

FIN 460: MANAGEMENT OF FINANCIAL INSTITUTIONS 15

**** Includes total demand deposits and noninterest bearing time and savings
deposits.

***** Report overnight Federal Home Loan Bank advances in Schedule RC, item 16,
Other borrowed money.

****** Includes all securities repurchase, regardless of maturity.

******* Includes limited-life preferred stock and related surplus.

******** Includes net unrealized holding gains (losses) on available for sale securities,
accumulated net gains (losses) on cash flow hedges, and minimum pension liability
adjustments.

********* Includes treasury stock and unearned Employee Stock Ownership Plan
shares.

This statement has not been reviewed or confirmed for accuracy or relevance by any member of the
FFIEC.