商业银行Chapter-5-homework1

Multiple Choice Questions

1. The noncash expense item on a bank's Report of Income designed to shelter a bank's

current earnings from taxes and to help prepare for bad loans is called: D

A) Short-term debt interest B) Noninterest expense C) Provision for taxes

D) Provision for possible loan losses E) None of the above.

2． Banks depend heavily upon borrowed funds supplied by customers with little owners'

capital invested. This means that banks make heavy use of: A A) Financial leverage B) Capital restructuring C) Operating Leverage D) Margin borrowing E) None of the above.

3. Large U.S. banks must use which of the methods listed below to determine their

provision for loan loss expense? C A) Experience method B) Reserve method

C) Specific charge-off method D) Historical cost method E) None of the above.

4. A bank's temporary lending of excess reserves to other banks is labeled on the

balance sheet as: B A) Fed Funds Purchased B) Fed Funds Sold

C) Money Market Deposits

D) Securities Purchased for Resale E) None of the above

5. A bank sells shares of its common stock with a par value of $100 for $200 in the

market. Which two accounts on the bank's balance sheet are going to be affected? D

A) Retained earnings and capital surplus accounts

B) Subordinated notes and debentures and commons stock outstanding accounts C) Retained earnings and common stock outstanding accounts D) Common stock outstanding and capital surplus accounts

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E) Only the common stock outstanding account is affected

6. A bank which starts with ALL of $1.48 million at the beginning of the year, charges

off worthless loans of $.94 million during the year, recovers $.12 million on loans previously charged off and charges current income for a $1.02 million provision for loan losses will have an ALL at the end of the year of: B A) $.66 million B) $3.32 million C) $1.68 million D) $1.28 million

E) The same amount as at the beginning of the year

7. A bank that has total interest income of $67 million and total noninterest income of

$14. million. This bank has total interest expenses of $35 million and total

noninterest expenses (excluding PLL) of $28 million. Its provision for loan losses is $6 million and its taxes are $5. What is this bank's net income? A A) $7 B) -$14 C) $18 D) $32

E) None of the above

8. You know the following information about the Miller State Bank

Gross Loans $300 Miscellaneous Assets $50 Deposits $390 Total Equity $50 Common Stock Par $5 NonDeposit Borrowings $60 Investment Securities $150 Net Premises $40 Surplus $5

Allowance for Loan Losses $50 Deposits $390 Total Assets $500 Gross Premises $70

Given this information, what is this firm’s Net Loans?A A) $250 B) $350 C) $500 D) $50 E) $150

9. You know the following information about the Davis National Bank

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Total Interest Expenses ($500) Total Non Interest Income $100 Securities Gains (Losses) $ 50 Income Taxes ($ 80) Dividends to Stockholders ($ 40) Total Interest Income $800 Total Non Interest Expenses ($150) Provision for Loan Losses ($100)

Given this information, what is this firm’s Net Income? D A) $300 B) $150 C) ($50) D) $120 E) $80

10. You know the following information about the Webb State Bank

Accumulated Depreciation $40 Net Loans $600

Fed Funds Purchased and Repurchase Agreements $200 Cash and Due from Banks $50 Trading Account Securities $40 Miscellaneous Assets $100 Deposits $500 Undivided Profits $140 Gross Premises $90 Surplus $40 Subordinated Debt $100 Investment Securities $160 Common Stock Par $20 Gross Loans $700

Given this information, what is this firm’s Total Assets? A A) $1000 B) $300 C) $800 D) $200 E) $500

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Problems

5-4 If you know the following figures:

Gross Loans

Allowance for Loan Losses Federal Funds Sold Common Stock Surplus

Total Equity Capital Cash and Due from Banks Miscellaneous Assets

Bank Premises and Equipment, Gross

Please calculate these items:

Total Assets Net Loans Undivided Profit Investment Securities

Depreciation Total Deposits

300 Trading Account Securities 15 Other Real Estate Owned 26 Goodwill and other Intangibles 12 Total Liabilities 19 Preferred Stock 49 Nondeposit Borrowings

9 Bank Premises and Equipment, Net 38 34

2 4 3 380 3 20 29

5-5. Hokie High Bank has Gross Loans of $550 million with an ALL account of $30 million.

Two years ago the bank made a loan for $10 million to finance the Hokie Hotel. One million dollars in principal was repaid before the borrowers defaulted on the loan. The Loan Committee at Hokie High Bank believes the hotel will sell at auction for $7 million and they want to charge-off the remainder immediately.

a.

The dollar figure for Net Loans before the charge-off is ?

After the charge-off, what are the dollar figures for Gross Loans, ALL and Net Loans

b.

assuming no other transactions.

c. If the Hokie Hotel sells at auction for $8 million, how with the affect the pertinent balance

sheet accounts?

5-9. See if you can determine the amount of Rosebush State Bank’s current net income after taxes

from the figures below (stated in millions of dollars) and the amount of its retained earnings from current income that it will be able to reinvest in the bank. (Be sure to arrange all the figures given in correct sequence to derive the bank’s Report of Income.)

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