INPUT SECTION

Report of Condition

Total assets
Cash & deposits due from bank
Investment securities
Federal funds sold
Gross loans and leases 1
(Less) Loan loss allowance 2
Net loans and leases 1 minus 2 3
Trading account assets
Bank premises and fixed assets
Other real estate owned
Goodwill and other intangibles
All other assets
Total earning assets

Total liabilities
Total deposits
Demand deposit 4
Saving deposits
Time deposits
Interest bearing deposits 3 plus 4
Federal funds purchased
Trading liabilities
Other borrowed funds
Subordinated debt
All other liabilities

Total equity capital

Perpetual preferred stock
Common stock
Surplus
Undivided profits
Retained earnings
Report of Income

Total interest income 7440748 1

Interest and fees on loans
Interest and dividends on securities
Total interest expense 3698401 2
Interest paid on deposits
Interest paid on nondeposit borrowings
Net interest income 3742347 1 minus 2
Provision for loan losses 284172
Total noninterest income 2454190
Fiduciary activities
Service charges on deposit accounts
Trading account gains & fees
Additional noninterest income
Total noninterest expenses 1254901
Salaries and employee benefits
Overhead expenses
Premises and equipment expense
Other noninterest expenses
Net noninterest income 915117 = Total nonint in - Provision for loan losses - To
Total operating revenues 9894938 = Total int in + Total nonint in
Total operating expenses 5237474 = Total int ex + Total nonint ex + Provision for l
Pretax net operating income 4657464
Securities gains (or losses) -7614 minus if negative & Plus if positive
Applicable income taxes 862637
Net operating income after taxes
Net operating income 3787213
Net extraordinary items 0 plus if gain & minus if losses
Net income 3787213

Number of shares
 REPORT SECTION

ROE #DIV/0! #DIV/0! % =NI/TE

ROA #DIV/0! #DIV/0! % =NI/TA
Net interest margin (NIM) #DIV/0! #DIV/0! % =Net interest in/TA
Net noninterest margin #DIV/0! #DIV/0! % =Net nonint in/TA
Net operating margin #DIV/0! #DIV/0! % =Net operating in/TA
Earning spread #DIV/0! #DIV/0! =(Total int in/Total earning assets) - (Total int ex/Inter
Net profit margin #DIV/0! 0.382742 % = NI/(Total int in + Total nonint in)
Asset utilization #DIV/0! #DIV/0! % =(Total int in + Total nonint in)/TA
Equity multiplier (EM) #DIV/0! #DIV/0! x =TA/TE
Tax management efficiency #DIV/0! 1.229787 = Pretax net operating in/NI
Expense control efficiency #DIV/0! 0.470692 =Pretax net operating in/(Total int in + Total nonint in
Asset management efficiency #DIV/0! #DIV/0! =(Total int in + Total nonint in)/TA
Funds management efficiency #DIV/0! #DIV/0! x =EM
Operating efficiency ratio #DIV/0! 0.529308 % =Total operating ex/Total operating rev
EPS #DIV/0! #DIV/0! $ =NI/No of shares

Conclusion
ROA is primarily an indicator of managerial efficienc
onint in - Provision for loan losses - Total nonint ex capable management has been in converting assets int
nt in + Total nonint in Return on equity (ROE), on the other hand, is a mea
nt ex + Total nonint ex + Provision for loan losses shareholders. It approximates the net benefit that the s
investing their capital in the financial firm (i.e., placin
earning a suitable profit)
negative & Plus if positive
The net operating margin, net interest margin, and net
measures as well as profitability measures, indicating
have been able to keep the growth of revenues (which
investments, and service fees) ahead of rising costs (p
in & minus if losses and other borrowings and employee salaries and benef
The net interest margin measures how large a spre
interest costs management has been able to achieve b
and pursuit of the cheapest sourc

The net noninterest margin, in contrast, measures th

stemming from service fees the financial firm has been
amount of noninterest costs incurred (including salarie
maintenance of facilities, and loan loss expenses). Typ
negative: Noninterest costs generally outstrip fee inco
rising rapidly in recent years as a percentage of all rev
maintenance of facilities, and loan loss expenses). Typ
negative: Noninterest costs generally outstrip fee inco
rising rapidly in recent years as a percentage of all rev

The spread measures the effectiveness of a financial f

borrowing and lending money and also the intensity o
marketarea. Greater competition tends to squeeze the d
yields and average liability costs. If other factors are h
as competition increases, forcing management to try to
generating fee income from new services) to make up
ssets) - (Total int ex/Interest bearing deposits)

al int in + Total nonint in)

r of managerial efficiency; it indicates how The net profit margin (NPM) reflects effectiveness of expense
n in converting assets into net earnings management (cost control) and service pricing policies.
n the other hand, is a measure of the rate of return flowing to
s the net benefit that the stockholders have received from
inancial firm (i.e., placing their funds at risk in the hope of The degree of asset utilization (AU): portfolio management polic
especially the mix and yield on assets.
interest margin, and net noninterest margin are efficiency
lity measures, indicating how well management and staff
owth of revenues (which come primarily from loans, The equity multiplier EM reflects leverage or financing policies:
) ahead of rising costs (principally the interest on deposits sources chosen to fund the financial institution (debt or equity)
ployee salaries and benefits)
measures how large a spread between interest revenues and
has been able to achieve by close control over earning assets a tax-management efficiency ratio, reflecting the use of security
suit of the cheapest sources of funding. gains or losses and other tax-management tools (such as buying tax
exempt bonds) to minimize tax exposure
, in contrast, measures the amount of noninterest revenues
he financial firm has been able to collect relative to the
ncurred (including salaries and wages, repair and
loan loss expenses). Typically, the net noninterest margin is
enerally outstrip fee income, though fee income has been Operating efficiency and expense control is an indicator of ho
as a percentage of all revenues. many dollars of revenue survive after operating expenses are remo
ectiveness of a financial firm’s intermediation function in
y and also the intensity of competition in the firm’s
ion tends to squeeze the difference between average asset
osts. If other factors are held constant, the spread will decline
ing management to try to find other ways (such as
ew services) to make up for an eroding earnings spread.
cts effectiveness of expense
service pricing policies.

portfolio management policies,

yield on assets.

erage or financing policies: the

institution (debt or equity)

flecting the use of security

ent tools (such as buying tax-
e

ontrol is an indicator of how

perating expenses are removed
 Prob 7.8
Coming week Next 30 days
Loans 210 300
Securities 21 26
Interest-sensitive assets (RSA) 231 326
Transaction deposits 350 0
Time accounts 100 276
Money market borrowings 136 140
Interest-sensitive liabilities(RSL) 586 416
Dollar Gap (Interest-sensitive Gap) -355 -90

ISA < ISL : negative gap, liability sensitive

gap

→ + Rising interest rates → lower this institution’s NIM ( because the rising cost associated with ISL > increases in interest r
+ Falling interest rates → higher interest margin and probably greater earnings as well, because borrowing costs will dec
→ + Lãi suất tăng → giảm NIM của tổ chức này (vì chi phí tăng liên quan đến ISL > tăng doanh thu lãi từ ISA.
+ Lãi suất giảm → tỷ suất lợi nhuận cao hơn và thu nhập có thể lớn hơn, vì chi phí đi vay sẽ giảm nhiều hơn doanh thu lãi.

ISA > ISL: positive gap, asset sensitive gap

1. When a bank's interest rate sensitive liabilities exceed its interest rate sensitive assets, or RSL > RSA, this bank
will have a negative gap and it will be liability-sensitive. Consequently, the rising interest rate will lower this
institution’s NIM as the rising cost associated with RSL will exceed the increase in interest revenue from RSA.
Falling interest rate will generate a higher NIM as borrowing costs will decline by more than the interest revenue.
+ RSL > RSA -> negative gap or liability-sensitive => rise IR then fall NIM; fall IR then rise NIM

2. If RSA exceeds the volume of RSL, the bank will be stated as having a positive gap. A positive gap means that
when rates rise, a bank’s profits or revenues will likely rise. When the interest rate increases, this bank’s net
interest margin (NIM) will increase because the interest revenue generated by assets will increase more than the
cost of borrowed funds, which results in a growth in its net interest income. On the other hand, the financial firms
with a positive gap will lose net interest rate income if interest rates fall. Institutions that profit from interest rate
differentials or fund their activities with loans must keep track of the gap. A bank, which hopes to borrow low and
loan high, must be keenly aware of the yield curve.
+ RSA > RSL -> positive gap or asset-sensitive => rise IR then rise NIM; fall IR then fall NIM
 Next 31-90 days More Than 90 Days
475 525
40 70
515 595
0 0
196 100 duration gap = Da - DL
100 50 Da > DL: maturity A > Maturity L
296 150 i.r tăng thì Price A giảm nhiều hơn price L --> Da - DL < 0 -->
219 445 i.r giảm thì Da - DL > 0
Da < DL : ngược lại

Duration: used to stabilize NW

SL > increases in interest revenue from ISA.

e borrowing costs will decline by more than interest revenues.
i từ ISA.
nhiều hơn doanh thu lãi.

D GAP = D A - DL
RSA, this bank +D A > DL: i.r increase F --> price of A decrease more than L --
ower this
from RSA.
erest revenue.

means that
ank’s net
more than the
e financial firms
m interest rate + leverage D Gap: càng lớn, NW càng sensitive with i.r
borrow low and Positive D Gap (DA > DL): value of A change more than value of
+ i.r tăng: value of A giảm mạnh hơn value of L ( decrease furthe
+ i.r giảm: value of A tăng mạnh hơn value of L (gain)

Negative D GAP ( DL > DA): value of L change > change in A

+ i.r tăng: value of L giảm sẽ giảm mạnh hơn value of A --> NW tă
+ i.r decrease --> value of L tăng > A --> NW giảm (loss)

D Gap = 0 --> NW no change even though i.r change

Long hedgers ( long call option): hedger from i.r giảm ( hedger po
Short Hedgers ( long put option): hedge from i.r tăng ( hedge neg
 A > Maturity L
A giảm nhiều hơn price L --> Da - DL < 0 --> NW = A -L --> NW giảm

o stabilize NW

rease F --> price of A decrease more than L --> greater decline in NW

càng lớn, NW càng sensitive with i.r

> DL): value of A change more than value of L
A giảm mạnh hơn value of L ( decrease further) --> NW lower --> Solution: need to lengthening DL and
shortening DA
A tăng mạnh hơn value of L (gain)

DL > DA): value of L change > change in A

L giảm sẽ giảm mạnh hơn value of A --> NW tăng
alue of L tăng > A --> NW giảm (loss)
--> Solution: need to shortening DL by borrowing less LT debt, instead using
no change even though i.r change ST debt and lonthening DA buy purchasing more LT and fixed A

g call option): hedger from i.r giảm ( hedger positive $ gap + negative D GaP)
ng put option): hedge from i.r tăng ( hedge negative $GAP + positive D GAP)
 The risk - weighted assets

Balance sheet Asset value Conversion factor

Cash $115.00

U.S. government securities $130.00

Domestic interbank deposits $130.00

Residential real estate loans $450.00

Commercial loans $520.00

OBS items

Standby credit letters that back municipal

$87.00 0.2
general obligation bonds
Long-term unused loan commitments to
$145.00 0.5
private companies

Total risk - weighted assets

The bank's capital ratio

Tier 1 capital $7.5

Tier 2 capital $5.8
Tier 1-capital-to-risk-weighted assets 0.89% Tier 1 capital/Total RWA
Total-capital-to-risk-weighted assets 1.57% Total captital/Total RWA
Leverage ratio = Tier 1 / TA
Risk weight Weighted average

0 $0.00

0 $0.00

0.2 $26.00

0.5 $225.00

1 $520.00

$3.48
0.2
$72.50
1

$846.98

>4% => the bank have sufficient capital

 => the bank have sufficient capital

>8%
ave sufficient capital
ave sufficient capital
INPUT
Annual Revenue and Expense Items
Net sales $ 650
Cost of goods sold $ 485

Wages and salaries $ 58

Interest expense $ 28

Overhead expenses $ 29

Depreciation expenses $ 12
Selling, administrative, $ 28
and other expenses
Before-tax net income $ 10
Taxes owed $ 3
After-tax net income $ 7
Principal payment on bonds and notes $ 55
Marginal tax rate 35%

OUTPUT
1. Control over expenses

Cost of goods sold/Net sales 74.62%

Wages and salaries/Net sales 8.92%
Interest expense on borrowed funds/Net sales 4.31%
Overhead expenses/Net sales 4.46%
Depreciation expenses/Net sales 1.85%

Selling, administrative, and other expenses/Net sales 4.31%

Taxes/Net sales 0.46%

2. Operating efficiency

Inventory turnover ratio 3.79

COGS
Average Inventory
FA turnover 2.27
Net sales
Net fixed assets
TA turnover 0.91
Net sales
Total assets
Net sales / Accounts receivable 4.19
Average collection period 85.85
Accounts receivable
Annual credit sales (Net sales)

3. Marketability of the Customer’s Product or Service

GPM 25.38%
Net sales
COGS
NPM 1.08%
Net income after taxes
Net sales

4. Coverage ratio

Interest coverage (Income before interest & taxes/ Interest pmt) 1.36

Interest expense 28.00

Before-tax net income 10.00
Coverage of interest and principle pmt (Income before interest &
taxes/ (Interest pmt+(Pricipal repayments/(1- firm's marginal tax 0.34
rate))))
Interest expense 28.00
Before-tax net income 10.00
Principal payment on bonds and notes 55.00
Marginal tax rate 0.35
Coverage of all fixed pmt (Income before I, taxes, & lease pmt/
#DIV/0!
(Interest pmt+ Lease pmt))
Income before I, taxes, & lease pmt
Interest pmt
Lease pmt

5. Liquidity indicators

Current ratio 1.55

Current assets
Current liabilities
Acid-test ratio 0.95
Current assets
Inventory
Current liabilities
Net liquid assets ($10)
Current assets
Inventory
Current liabilities
Net working capital $118
Current assets
Current liabilities

6. Profitability indicators

Before-tax net income/ total assets 1.40%

ROA 0.98%
before tax net income/ networth 6.25%
ROS 0.98%

7. Financial Leverage Factor

Leverage ratio 77.62%

Total Liablilities
Total Assets
Capitalization ratio 67.01%
Long-term debt
Total long-term liabilities & net worth (Long-term debt + equity)
Debt-to-sales ratio 85.38%
Total Liablilities
Net sales
Debt Equity ratio 3.46875
Total Liablilities
Equity Capital
Liabilities and Equity 715 Business Assets 715
Accounts payable $ 108 Cash account $ 50
Notes payable $ 107 Accounts receivable $ 155

Short-term debt: $ 215 Inventories $ 128

Long-term debt (bonds) $ 325 Curent Assets $ 333

Miscellaneous liabilities $ 15 Fixed assets $ 286

Total Liabilities $ 555 Miscellaneous assets $ 96

Equity capital $ 160

1.how carefully firm controls

its expenses and how well its
earnings to repay a loan.
(1. công ty kiểm soát chi phí
của mình một cách cẩn thận
như thế nào và thu nhập của
họ để hoàn trả một khoản vay
như thế nào)
1.how carefully firm controls
its expenses and how well its
earnings to repay a loan.
(1. công ty kiểm soát chi phí
của mình một cách cẩn thận
như thế nào và thu nhập của
họ để hoàn trả một khoản vay
như thế nào)

2. How effectively are assets

being utilized to generate sales
and how efficiently are sales
converted into cash. (2. Các tài
sản đang được sử dụng hiệu quả
như thế nào để tạo ra doanh số
bán hàng và doanh số bán hàng
được chuyển đổi thành tiền mặt
hiệu quả như thế nào.)
x

x
days

3. The ability of market goods,

services, or skills successfully
generate adequate cash flow to
repay a loan. (3. Khả năng của
hàng hóa, dịch vụ hoặc kỹ năng
thị trường tạo thành công dòng
tiền phù hợp để trả một khoản
vay.)
4. protection afforded
creditors based on the amount
of a business customer’s
earnings. (4. bảo vệ các chủ nợ
có khả năng chi trả dựa trên số
tiền thu nhập của khách hàng
doanh nghiệp.)

5. his or her ability to raise cash in

timely fashion at reasonable cost,
including the ability to meet loan
payments when they come due.
(5. khả năng huy động tiền mặt
kịp thời với chi phí hợp lý, bao
gồm cả khả năng đáp ứng các
khoản vay khi đến hạn.)

x
x

6. how much net income remains

for the owners of a business firm
after all expenses (6. thu nhập
ròng còn lại bao nhiêu cho chủ sở
hữu của một công ty kinh doanh
sau tất cả các chi phí)

7. how much debt a borrower has

taken on in addition to the loan
being sought. (7. người đi vay đã
gánh bao nhiêu nợ ngoài khoản
vay đang tìm.)
INPUT SECTION
Automobile loan $33,000
Period 48 m
Finance charges $5,500
Cho tất cả mọi thứ
CALCULATION SECTION và việc cần làm là
tính i (periodic
Total amount $38,500 =Automobile loan + Finance charges rate) => i * N
Monthly payments $802.08 =Total amount/period (n=12) => APR
Periodic rate (i) 0.65% = Rate(period, - monthly pmt, Automobile loan)
OUTPUT SECTION
APR 7.77%

INPUT SECTION
N 12
Financial charged $4.25
Loan -PV $100
CALCULATION SECTION
Total amount $104.25
monthly pmt $8.69
periodic interest rate 0.65%
OUTPUT SECTION
a)APR 7.75%
b) monthly PMT for 7.75% APR in
6m ($17.05)
Total be repaid 26.92%
dollar amount saved $ 3.11
 INPUT SECTION
APR 7.77%
Loan (PV) 33,000
Period 48
Cho tất cả mọi thứ
và việc cần làm là Cho APR và i. pmt,
tính i (periodic period… Bắt tính
rate) => i * N Automobile loan
(n=12) => APR CALCULATION SECTION
Monthly pmt $ (802.07)
Total amount $ (38,499)

OUTPUT SECTION
Finance Charge $ 5,499
m

=PMT(APR/12, period, Loan)

=Monthly pmt * period

=Total amount - Loan

PROB 10.1

∑_(𝑡=1)^𝑛▒ 〖𝐶𝑃𝑡 /(( 1+𝑌𝑇𝑀)^𝑡)+ 𝐹𝑉𝑛/(( 1+𝑌𝑇𝑀)^𝑛) 〗

Formula PV = = 𝐶𝑃𝑡/𝑌𝑇𝑀 × (1 - 1/((1+𝑌𝑇𝑀
CPt 75
FVn 1000
PV 1025
t, n 10
YTM -7.13%

PROB 10.2

Formula

t 1 2 3 4 5
CF 75 75 75 75 75
YTM 6% 6% 6% 6% 6%
Exepcted CF * t/(1
+YTM) ^t 70.75 133.50 188.91 237.63 280.22

Total 2772.18
Price 1000

D 2.77
PROBLEM 11.1

Formula

Problem 11.4
PROBLEM 11.6
 0 -1025
1 75
2 75
3 75
4 75
5 75
𝑀 × (1 - 1/((1+𝑌𝑇𝑀)^𝑡)) +𝐹𝑉𝑛/(( 1+𝑌𝑇𝑀)^𝑛)
6 75
7 75
8 75
9 75
10 1075
7.14%

6 7 8 9 10
75 75 75 75 75
6% 6% 6% 6% 6%

317.23 349.15 376.45 399.53 418.80

PROB 10.8

PROBLEM 10.13
Supplies 386
incoming deposits 87
Rev from the sale of nondeposit services 95
Customer loan repmt 89
Sales of assets 40
Borrowings from the money market 75

Demands 409
Deposit withdrawals outflows 98
Volume of acceptable loan requests 56
Repmt of borrowings 60
Other operating exp 45
Div pmt to stockholders 150

Lt -23

Faced with an expected liquidity deficit Pretty Lake Hills State Bank could
arrange to increase its money market borrowings from other institutions or Fed
gov or sell some of its assets or do some of both.

Formula
Deposit and non deposit liability liquidity requirement 1991.14 760.748
Hot money funds 791.7 75% 593.775
Vulnerable funds 713.34 20% 142.668
Stable funds 486.1 5% 24.305

Loan liquidity requirement

Potential loans outstanding 2567 8% 2772.36
Actual loans outstanding 2389 8% 2580.12
Change in estimates
Total liquidity requirement (high estimates) 1144.108
Total liquidity requirement (low estimates) 951.868
a) In this case, assets are sold to provide the needed liquidity
Total assets decrease by 5100 - 500 =$4600m
b)The L falls into 4500 - 500 = 4000 $m but the size of bank totally doesn’t change
years to ma3m 6m 1y 2y 3y
Interest rat 1.85% 1.99% 2.17% 2.51% 2.82%

Yield Curve of Treasury Securities

5.00%
4.50%
4.00%
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
3m 6m 1y 2y 3y 5y 7y 10y 20y 30y
($ million)
 hot money funds - Required legal reserves held behind deposits
checkable deposits saving deposits time deposits Total Total adjusted
10 782 792 791.7
22 152 540 714 713.34
30 285 172 487 486.1

383.36
191.12
 5y 7y 10y 20y 30y
3.28% 3.56% 3.98% 4.69% 4.68%

10y 20y 30y