Ch_03_Analyze_Bk_Performance

Ch_03_Analyze_Bk_Performance - Analyzing Bank Performance...

Info iconThis preview shows pages 1–15. Sign up to view the full content.

View Full Document Right Arrow Icon
Analyzing Bank Performance 11
Background image of page 1

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

View Full DocumentRight Arrow Icon
Analyzing Bank Performance n In 2008, depository institutions reported: n Worsening asset quality leading to higher charge-offs n Shrinking net interest income n Declining non-interest income n These factors led to lower profits, ROE, ROA, and bank failures 22
Background image of page 2
33
Background image of page 3

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

View Full DocumentRight Arrow Icon
Analyzing Bank Performance n Depository Institution Failures n Over 1,500 bank failures between 1985 and 1993 n 0 in 2005 or 2006 n 3 in 2007 n Sharp increase in 2008 and 2009 n 26 in 2008 n 142 in 2009 44
Background image of page 4
Commercial Bank Financial n Most depository financial institutions own few fixed assets and thus exhibit low operating leverage n Many bank liabilities carry short-term maturities. As a result, interest expense changes coincidentally with short-run changes in market interest rates 55
Background image of page 5

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

View Full DocumentRight Arrow Icon
Commercial Bank Financial n Many commercial bank deposits are insured by the FDIC. Insured deposits carry below-market interest rates n Banks operate with less equity capital than non-financial companies, which increases financial leverage and the volatility of earnings 66
Background image of page 6
Commercial Bank Financial n Bank Assets n Loans n Real Estate n Commercial n Individual n Agricultural n Other loans in domestic offices n Loans and leases in foreign offices 77
Background image of page 7

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

View Full DocumentRight Arrow Icon
Commercial Bank Financial n Bank Assets n Adjustment to Loans n Gross Loans and Leases § minus n Unearned Income n Loan and Lease Loss (Allowance for Loan Loss or ALL) § equals n Net Loans and Leases 88
Background image of page 8
Commercial Bank Financial n Bank Assets n Investment Securities n Short-Term Investments § One year or less § Examples: § Interest-Bearing Deposits Due from Other Banks § Fed Funds Sold § Reverse Repos § T-Bills 99
Background image of page 9

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

View Full DocumentRight Arrow Icon
Commercial Bank Financial n Bank Assets n Investment Securities n Long-Term Investments § Over one year § Examples: § T-Notes and T-Bonds § Government Agency Issues § Foreign and Corporate Bonds § Mortgage-Backed Securities § Municipal Securities: General Obligation § Municipal Securities: Revenue 1010
Background image of page 10
Commercial Bank Financial n Bank Assets n Investment Securities n Held-to-Maturity n Trading Account n Available-for-Sale 1111
Background image of page 11

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

View Full DocumentRight Arrow Icon
Commercial Bank Financial n Bank Assets n Investment Securities n Held-to-Maturity § Intent and ability to hold until maturity § Recorded at cost (Book Value) § Changes in value (unrealized gains or losses) are NOT reflected on the balance sheet or income statement § May be a current or long-term asset, depending on maturity 1212
Background image of page 12
Commercial Bank Financial n Bank Assets n Investment Securities n Trading Account § Objective is to generate trading profits § Marked-to-Market § Changes in value (unrealized gains and losses) ARE reflected on the Income Statement § Always a current asset, regardless of maturity of the underlying security 1313
Background image of page 13

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

View Full DocumentRight Arrow Icon
Commercial Bank Financial n Bank Assets n Investment Securities n Available-for-Sale § For those securities that do not fall into the HTM or Trading categories § Market-to-Market § Change in value (unrealized gains or
Background image of page 14
Image of page 15
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/07/2011 for the course FIN 653 taught by Professor Cobus during the Spring '08 term at S.F. State.

Page1 / 59

Ch_03_Analyze_Bk_Performance - Analyzing Bank Performance...

This preview shows document pages 1 - 15. Sign up to view the full document.

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