0030 or 3 986 986 c roa net income 65521 2 or 142

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-0.0030 or -.3% $986 $986 c. ROA = Net Income = [($65+$5+$2+$1) ($48+$8+$3)] = $14 = 0.0142 or 1.42% Total Assets $986 $986 6-13. Valley Savings reported these figures (in millions) on its income statement for the past five years. Calculate t his institution’s ROA in each year. Are there any adverse trends? Any favorable trends? What seems to be happening to this institution? Current Year One Year Ago Two Years Ago Three Years Ago Four Years Ago Gross Interest Income $40 $41 $38 $35 $33 Interest Expenses 24 23 20 18 15 Net Interest Income 16 18 18 17 18 Provision for Loan Losses 2 1 1 0 0 Net Interest Income after 14 17 17 17 18 Loan Loss Provision Noninterest Income 4 4 3 2 1 Noninterest Expense 8 7 7 6 5 Net Noninterest Income (4) (3) (4) (4) (4) Income before Taxes 10 14 13 13 14 Income Taxes 1 1 0 1 0 Net Income after Taxes 9 13 13 12 14 but Before Gains (Losses) Net Securities Gains (Losses) (2) (1) 0 1 2 Net Income 7 12 13 13 16 Total Assets 385 360 331 319 293 ROA 1.8% 3.33% 3.93% 4.08% 5.46% Valley's ROA has gone from an exceptional level, at almost 5.5%, progressively down to a reasonably good level, at 1.8%, over the last four years. Growth in interest and noninterest income has been outstripped by the growth in interest and noninterest expense, as well as the increase in the allowance for loan losses, resulting in a significant decline in net income from operations. Needless to say, the shift from gains in securities trading to losses has not been helpful either.
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85 6-14. An analysis of the UBPR reports on NCB was presented in this chapter. We examined a wide variety of profitability measures for that bank including ROA, ROE, net profit margin, net interest and operating margins, and asset utilization. However, the various measures of earnings risk, credit risk, liquidity risk, market risk (price and interest rate risk), and capital risk were not discussed in detail. Using the data in Tables 6-5 through 6-9, calculate each of these dimensions of risk for NCB for the most recent two years and discuss how the bank’s risk exposure appears to be changing over time. What steps would you recommend to management to deal with any risk exposure problems you observe? Note to instructors: The Uniform Bank Performance Report (UBPR) is provided to each bank by the Federal Financial Institutions Examination Council. The UBPR is prepared from the call reports of condition and income that are filed quarterly by all banks. It (the UBPR) is for the use of regulators and management to assess how well the bank is performing relative to its internal goals and its peer group. The user's guide to the UBPR is available from the FFIEC for a nominal fee and details the various ratios and comparative data contained in the UBPR. The actual UBPR is much more detailed than the example provided in the text as Tables 6-5 through 6-9. These exhibits are for illustrative purposes and do not contain all the information that is necessary to calculate all the risk measures described in the text. The instructor may find it helpful to use UBPRs provided by a few local banks in class discussions.
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  • Spring '16
  • Rose
  • Financial services, Federal Reserve System, financial service

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