SC3 Chaper 12 Introduction to Financial Statements-SP2011

SC3 Chaper 12 Introduction to Financial Statements-SP2011 -...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
Click to edit Master subtitle style Commercial Banks’ Financial Statements and Analysis Saunders and Cornett Financial Markets and Institutions 3rd Edition Chapter 12
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Importance of Financial Statement Data Most banks are not publicly traded and therefore have no observable stock or bond prices Heavily utilized by Regulators in evaluating the safety and soundness of bank Heavily relied upon by industry analysts to evaluate bank performance Heavily relied upon by Ownership and Management to evaluate bank performance
Background image of page 2
Two Key Financial Statements Report of Condition Report of Income
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Report of Condition aka balance sheet shows the amount of funds of generated by each type of liability and equity (deposits, purchased funds, and equity) the bank has used to finance its lending and investing activities shows how much of the bank’s funds have been allocated to each type of lending and investment activity (cash, loans,securities,and fixed assets) Is thus a reflection of the decisions that bank management has (already) made.
Background image of page 4
Balance Sheet Key Asset Categories Cash and Due from Depository Institutions – primarily made up of required reserves Vault cash, deposits at Fed, CIPC, pass-through accts. Reserve Requirements : Example of Req Res Computation Net Transactions Account Balances Interest Bearing Deposits at other banks Fed Funds Sold & Reverse RPs (RPs purchased) excess cash available for short-term liquidity needs Securities Investment securities (provide income, liquidity and diversification) Maturity Short-term – held primarily as secondary reserves (i.e. secondary source of liquidity) Long-term – held primarily for diversification and interest income
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Balance Sheet Loans and Leases, Gross Less Reserve (Allowance) for Loan and Lease Losses (contra-asset) - [general and specific reserves] computing general reserve FAS 114 – specific reserve for impaired loans FAS 5 – general reserves (for loans not classified as impaired)
Background image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 25

SC3 Chaper 12 Introduction to Financial Statements-SP2011 -...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online