CML.Week4.5.Fall18.pptx - Commercial Banking 6F:114 Commercial Banking Fall 2018 Leighton Smith [email protected] Commercial Banking Commercial

CML.Week4.5.Fall18.pptx - Commercial Banking 6F:114...

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Commercial Banking 6F:114 Commercial Banking Fall 2018 Leighton Smith [email protected]
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Commercial Banking Commercial Banking Financial Statement & Performance Evaluation of Banks
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Commercial Banking Overview Mastering : Balance sheet Income statement Sources and uses of funds Stockholder equity Beginning to consider : Stock Values and profitability ratios Measuring credit, liquidity, and other risks Measuring operating efficiency Relevance and effects of size, type of bank
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Commercial Banking Objectives Can you describe the purpose of banking regulation? Protect against public loss; Do you understand ‘your’ bank’s financial statements? How do the financial statements of your bank and its peer group differ? Can you analyze a bank’s performance? Can you evaluate the kinds of risk that a bank is taking?
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Commercial Banking Three Characteristics of CML Banks Few fixed assets Short duration liabilities - Many payable on demand Very high leverage - Less equity capital than non-financial co’s
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Commercial Banking Bank Regulation 101 https:// https://
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Commercial Banking Impact of Deregulation Encouraged larger, riskier loan portfolios Changed the way banks view branch offices Forced banks to cut operating expenses
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Commercial Banking Bank Financial Statements Balance Sheet (Report of Condition) Income Statement (Report of Income) Sources and Uses of Funds Statement Statement of Stockholders’ Equity
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Commercial Banking Balance Sheet Report of Condition
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Commercial Banking Balance Sheets Generally Assets = Liabilities + Equity What are examples of L & E for: Your favorite local restaurant? A large manufacturing company?
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Commercial Banking Bank Balance Sheets Assets = Liabilities + Equity C + S + L + MA = D + NDB + EC Cash, Securities, Loans & Misc Assets Deposits, Nondeposit borrowings, & Equity capital [pg 130-131, 152]
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Commercial Banking Cash Includes: Vault cash Deposits with other banks Cash items in process of collections Reserve account with Federal Reserve Sometimes called ‘primary reserves’
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Commercial Banking Security Holdings Includes: Money market securities (‘secondary reserves’) Investment securities - taxable - non-taxable Trading account securities - held for resale only - valued at market value
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Commercial Banking Loan Accounts Gross loans – sum of all loans Allowance for possible loan losses - contra asset account - for potential future loan losses Net loans Nonperforming loans
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Commercial Banking Types of Loan Commercial and industrial Consumer Real estate Financial institution Foreign Agricultural Security Leases
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Commercial Banking Allowances for Loan Losses Allowance for Loan Losses Provisions for loan losses Recoveries Charge offs
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Commercial Banking Impact of the Financial Crisis
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Commercial Banking How Does This Compare?
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  • Fall '19
  • Balance Sheet, Generally Accepted Accounting Principles, FDIC

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