Understanding Bank Balance (Done)
You have a loan portfolio of $100,000,000 and you need a reserve of 1%. What is the value of your reserve?
$1,000,000.
What is OREO?
A non-earning asset taken back through foreclosure.
What is a balance sheet?
A picture of what you have today for assets and liabilities.
What is an income statement?
A summary of income over a period of time.
What is the basic principle of the bank balance sheet? What is important about the right side?
Assets are equal to liabilities plus equity. The right side of the balance sheet "does not belong to you".
How do you calculate ending stockholders equity?
Beginning Stockholders Equity + Income - Dividends.
How do you calculate book value-per-share?
Equity / Number of Shares
What do we mean by non-performing assets? More specifically, name the two types.
Non-performing loans and REO properties.
What does NPL and NPA mean?
Non-performing loans and non-performing assets.
A balance statement is a __________ and an income statement is a __________.
Point in time, period of time.
What constitutes common examples of the banks liquid assets?
Teller cash, any cash your bank has in another bank, and unpledged securities.
A complete set of financial statements are?
The GAAP financials and include the balance sheet, the income statement, the statement of cash flows, and the financial foot notes.
Bank A and Bank B have the same level of assets, same amount of income, but they have a different ROE, how is this possible?
There is a difference in how much they have leveraged their equity.
What does a bank use most of its deposits for?
To make loans.
What is ROA (Return on Assets)?
Total Income / Total Assets This ratio shows the percentage of profit a company earns in relation to its overall resources.
What is ROE (Return on Equity)?
Total Net Income / Total Stockholders Equity
FHLB loans are not a receivable nor an asset of the bank. True or False?
True
What is peer analysis?
Using call reports, you compare the performance and allocation of your bank with a group of peers.
What is the percentage of loan reserve that must be maintained?
Usually 10%
What can you do if you don't like a metric?
You can change the numerator or the denominator.
Do you want your efficiency to be lower or higher than the competition?
You want your efficiency ratio to be lower since it measures how much of a dollar of revenue your bank spends on operating expenses.