Chapter 15
Problem 01
Input Area:
Tier 1 Capital 4,500,000
Tier 2 Capital 2,500,000
Total Assets 95,000,000
Total risk-weighted assets 75,000,000
Output Area:
Leverage ratio 4.74%
Total Capital/Total assets 7.37%
Tier 1 Capital/Risk weighted assets 6.00%
Total Capital/Risk weighted assets 9.33%
Chapter 15
Problem 04
Input Area:
On Balance Sheet Items (Assets)
Cash 4,000,000
U.S Treasury securities 30,600,000
Deposit balances due from other banks 4,000,000
Loans secured by first lines on residential
property (1-4 family dwellings)
66,000,000
Loans to corporations 105,300,000
Off Balance Sheet Items
Standby letters of credit 20,500,000
Long term unused loan commitments to
corporate customers
25,500,000
Tier 1 capital 7,500,000
Tier 2 capital 5,800,000
Output Area:
Total assets 209,900,000
Total off balance sheet items 46,000,000
Tier 1 Capital/Risk-Weighted Assets 4.35%
Total Capital/Risk-Weighted Assets 7.72%
Off-Balance Sheet Items Face Value
Conversion
Factor
Credit Equivalent
Amount
Standby letters of credit 20,500,000 1.0000 20,500,000
Long term unused loan commitments to
corporate customers
25,500,000
0.5000 12,750,000
Risk-Weighting Percentages
$ sum of items by
risk category
Risk-weighted
assets
034,600,000 0
04,000,000 800,000
166,000,000 33,000,000
1138,550,000 138,550,000
172,350,000
Total Risk Weighted Assets >>>>>>>>
Chapter 15
Problems 5 & 6
Input Area: Problem 05
Balance Sheet Items $ Amount
Cash 75,000,000
Domestic interbank deposits 130,000,000
U.S. Treasury securities 250,000,000
Residential real estate loans 375,000,000
Commercial loans 520,000,000
Standby letters of Credit 87,000,000
Long term unused loan commitments 145,000,000
Input Area: Problem 06
Types of Capital $ Amount
Common stock (par value) 5,000,000
Surplus 15,000,000
Undivided profits 30,000,000
Allowance for loan losses 25,000,000
Subordinated debt capital 20,000,000
Output Area: Problem 05 `
Output Area: Problem 06
Chapter 15
Problem 07
Input Area:
Profit margin (net income/operating revenue) 16.00%
Asset utilization (operating revenue/assets) 8.25%
Equity multiplier 10.00
Earnings retention ratio 60.00%
Output Area:
Internal capital growth rate 7.92%
Chapter 15
Problem 08
Input Area:
Name of Bank
Net Income /
Total Assets
(ROA)
Net Income /
Total Equity
Capital (ROE)
First National Bank of Hopkins 1.25% 15.00%
Safety National Bank 1.20% 13.00%
Ilsher State Bank 0.90% 11.00%
Mercantile Bank and Trust Company 0.25% 3.00%
Lakeside National Trust -0.50% -7.00%
Output Area:
Name of Bank Equity
Multiplier
Capital-to-total
assets
First National Bank of Hopkins 12.00 8.33%
Safety National Bank 10.83 9.23%
Ilsher State Bank 12.22 8.18%
Mercantile Bank and Trust Company 12.00 8.33%
Lakeside National Trust 14.00 7.14%
Chapter 15
Problem 09
Input Area:
Operating Revenues
Alternative 1
180,000,000
Alternative 2
225,000,000
Alternative 3
110,000,000
Operating Expense Base
25,000,000
Add’l Op Expense % of Rev
70.00%
Income Tax Rate
34.00%
Shares issued of common stock
Alternative 1 5,720,000
Alternative 2 5,400,000
Alternative 3 5,400,000
(a) (b) (c)
Sale of Sale of 9%
Alternative 3 for raising capital Common Stock Preferred Stock Sale of 10%
at $25 per share at $12 per share Capital Notes
Operating Revenues 110,000,000 110,000,000 110,000,000
Operating Expenses 102,000,000 102,000,000 102,000,000
Net Revenues 8,000,000 8,000,000 8,000,000
Interest on Capital Notes 800,000
Before-Tax Income 8,000,000 8,000,000 7,200,000
Estimated Income Taxes 2,720,000 2,720,000 2,448,000
After-Tax Income 5,280,000 5,280,000 4,752,000
Preferred Stock Dividends 720,000
Net Income for Common Stockholders 5,280,000 4,560,000 4,752,000
Shares of Common Stock Outstanding 5,720,000 5,400,000 5,400,000
Earnings Per Share of Common Stock $0.92 $0.84 $0.88