The Great National Bank has the following balance sheet and income statement:. Assets Liabilities and Equity
Cash and due from banks $8,000 Demand deposits $16,000
Investment securities $20,000 NOW accounts $79,000
Repurchase agreements $35,000 Retail CD's $23,000
Loans $75,000 Debentures $21,000
Fixed assets $20,000 Total Liabilities $139,000
Other assets $6,000 Common stock $10,000
Paid-in capital $5,000
Total assets $164,000 Retained earnings $10,000
Total Liabilities and Equity $164,000
Income Statement
Interest on fees and loans $11,000
Interest on investment securities $5,000
Interest on repurchase agreements $7,000
Interest on deposits in banks $1,000
Total interest income $24,000
Interest on deposits $8,000
Interest on debentures $3,000
Total interest expense $11,000
Net interest income $13,000 $ 13,000 = [Total interest income ($ 24,000) less Total interest expense ($ 11,000)
Provision for loan losses $3,000
Noninterest income $1,000
Noninterest expenses $1,000
Income before taxes $10,000
Taxes $4,000
Net income $6,000
For The Great National Bank, calculate:
a. Return on equity
b. Return on assets
c. Asset utilization
d. Equity multiplier
e. Profit margin
f. Interest expense ratio
g. Provision for loan loss ratio
h. Noninterest expense ratio
i. Tax Ratio
a. Return on Equity = Net income / Total equity capital total equity capital = common stock + paid-in capital + retained earnings = 6,000/(10,000 + 5,000 + 10,000) =
b. Return on Assets = (Net income / Total assets)
= 6,000/164,000 =
c. Asset utilization = Total operating income / Total assets total operating income = interest income + noninterest income = (24,000 + 1,000)/164,000 =
d. Equity multiplier = Total assets / Total equity capital
= 164,000/(10,000 + 5,000 + 10,000) =
e. Profit margin = Net income / Total operating income
= 6,000/(24,000 + 1,000) =
f. Interest expense ratio = Interest expense / Total operating income
= 11,000/(24,000 + 1,000) =
g. Provision for loan loss ratio = Provision for loan losses / Total operating income
= 3,000/(24,000 + 1,000) =
h. Noninterest expense ratio = Noninterest expense / Total operating income
= 1,000/(24,000 + 1,000) =
i. Tax ratio = Income taxes / Total operating income
= 4,000/(24,000 + 1,000) =