Drake DRAKE UNIVERSITY Fin 286 Depository Institutions.

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Drake DRAKE UNIVERSITY Fin 286 Depository Institutions
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Transcript of Drake DRAKE UNIVERSITY Fin 286 Depository Institutions.

Page 1: Drake DRAKE UNIVERSITY Fin 286 Depository Institutions.

DrakeDRAKE UNIVERSITY

Fin 286

Depository Institutions

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DrakeDrake University

Fin 286Depository Institutions

Main criteria is that a significant portion of the firms funds come from customer deposits.

Examples include:Commercial Banks Savings and LoansCredit Unions

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Fin 286Recent Trends

The 1990’s ended with the Fin Modernization Act (1999).During this time there has been a wave of mergers and acquisitions in the industry.The increased business services that Depository Institutions are now allowed to offer has created a desire for larger less regional institutions.

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Source FDIC Future of Banking Study FOB-2004-02.1

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Fin 286

Largest Depository Institutions, Dec 31, 2003 by total assets (billions)

$ % %Dom Assets Assets Dep

J.P Morgan Chase $1009 11.11% 6.61%Bank of America $870 9.58% 9.82%Citigroup $796 8.77% 3.47%Wells Fargo $380 4.19% 4.62%Wachovia Corp $362 3.99% 4.09%Washington Mutual $276 3.04% 3.23%US Bancorp $192 2.12% 2.19%National City Corp $132 1.45% 1.17%SunTrust $125 1.37% 1.47%ABN ARMCO $107 1.18% 0.87%

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DrakeDrake University

Fin 286Traditional Services

Depository Institutions have been traditionally been subject to a large amount of regulation that restricted their actions.Main business functions:

Consumer and Business LendingSavings ProductsPayment Services

Main overlap with other FI’s has been in Savings products – That has changed dramatically in the last 10 years.

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Fin 286Key Regulatory Legislation

National Currency and Bank Acts (1863-64)Set up system of federally chartering banks through US Treas Dept. or Comptroller of Currency or Administrator of National BanksComptroller of the Currency examines all nationally chartered banks every 12 to 18 monthsEstablished pledging requirements for owners equity

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Fin 286Key Regulatory Legislation

The Federal Reserve Act (1913)Established the Federal Reserve System as a lender of last resortEstablished network to clear and collect checks

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Fin 286Key Legislation

McFadden Act (1927) National banks allowed branches in their original city.Branching across state lines forbidden unless allowed by state lawLiberalized banks’ underwriting activities and allowed underwriting of corporate stocks and bonds

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Fin 286Legislation (continued)...

1933 Glass-Steagall: Separates securities and banking activitiesProhibited commercial banks from most underwriting of securities. 4 exceptions: Munis, US govt, Private Placement and Real Estate Loans. Fear of conflict of interestEstablished FDICNational banks allowed to branch state wide if state chartered banks were allowed to do so.

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Fin 286Legislation (continued)...

Bank Holding Company Act and subsequent amendments (1956 1966 and 1970)

Specifies permissible activities and regulation by Fed Res of Bank Holding Cos.Bank Holding Companies must request Fed Approval Co’s with 2 or more banks must register with Fed Res and file financial statements and submit to Fed Res review of their books1970 Amendments to the Bank Holding Company Act: Extension to one-bank holding companies

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Fin 286Legislation (continued)...

1970 International Banking Act: Regulated foreign bank branches and agencies in USA1980 Depository Institutions Deregulation and Monetary Control Act

Phased out interest rate ceilings imposed by Regulation QGoal was to make S&L’s, credit unions and other nonbank depository institutions more competitive.

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Fin 286Legislation (continued)…

Depository Institutions Act (1982) Garn-St. Germain Depository Institutions Act)

Allowed all federally supervised depository Institutions to sell deposit accounts equivalent to Money market mutual fund accountsLoan limits were liberalized for national banks, allowed lending of up to 15% of their capitalFDIC could arrange mergers across state lines for failing institutions

Competitive Equality in Banking Act (1987)Redefined bank to limit growth of nonbank banks.

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Fin 286Legislation (continued)…

Financial Institutions Reform Recovery and Enforcement Act (1989)

Imposed restrictions on investment activitiesReplaced FSLIC with FDIC-SAIFReplaced FHLB with Office of Thrift SupervisionCreated Resolution Trust Corporation

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Fin 286Legislation (continued)…

1991 FDIC Improvement ActFear of FDIC insolvency by end of 1991Ordered new measurement scale for describing financial condition of depository institution and when in violation to take “prompt corrective action”Risk-based deposit insurance premiums Limited “too big to fail”

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Fin 286Legislation (continued)…

Riegle-Neal Interstate Banking and Branching Efficiency Act (1994)

Permits BHCs to acquire banks in other states.Invalidates some restrictive state laws.Permits BHCs to convert out-of-state subsidiary banks to branches of single interstate bank.Newly chartered branches permitted interstate if allowed by state law.

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Fin 286

1999 Financial Services Modernization Act

Financial Services Modernization ActAllowed banks, insurance companies, and securities firms to enter each others’ business areasProvided for state regulation of insuranceStreamlined regulation of BHCsProhibited FDIC assistance to affiliates and subsidiaries of banks and savings institutionsProvided for national treatment of foreign banksATM fees must be clearly disclosedFederal Crime to steal account information

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FDIC

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Fin 286Structural Changes

0100200300400500600700

1940 1950 1960 1970 1980 1990 2000New Charters Conversions Mergers

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Source FDIC

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Fin 286FDIC Institutions

4,000

6,000

8,000

10,000

12,000

14,000

16,000

1934 1944 1954 1964 1974 1984 1994

Institutions

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Fin 286Competition among FI’s

Payment Savings Fiduciary Insurance

Services Products Services Bus Cons Equity Debt Risk Mgmt

Depository Institutions X X X X X

Insurance Companies X x X

Finance Companies x X

Securities Firms X X X X

Pension Funds X

Mutual Funds X

Depository Institutions X X X X X X X X

Insurance Companies X X X X X X X X

Finance Companies X X X X X x x X

Securities Firms X X X X X X X X

Pension Funds X X X X

Mutual Funds X X X X

UnderwritingLending

1950

2000

Products Sold by US

Financial Institutions

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Fin 286Unresolved Issues

Does regulatory approval limit the ability of banks to respond to new markets?

Will functional regulation work (can regulatory agencies work together?)

Can and will countries work together as institutions become more global?

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Fin 286

Bank Size (by asset concentration)

Community banks – under $1billion in assets specialize in retail or consumer lendingThe asset share of banks over $1Billion has increased from 63.4% in 1984 to 83.9% in 2000.Large banks often have access to cheaper forms of cash.Money Center Banks – Heavy reliance on nondeposit or borrowed funds.

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Fin 286Balance Sheet

Assets - four major categoriesCash and deposits held at other institutionsGovernment and private interest bearing securitiesLoans and leasesMisc assets.

Liabilities – two major categoriesDepositsNon deposit borrowing

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Fin 286Assets

Cash (Primary Reserves) – includes vault cash, reserves at the Fed Res, deposits at other banks, checks in the process of collection. Designed to meet liquidity needs

Investment Securities Liquid portion (Secondary Reserves) – ST Gov’t securities, money market securities, commercial paper, time depositsIncome Generating portion – Bonds notes and other securities (taxable and tax exempt).Trading account securities – bank serve as a security dealer for state, federal and local gov’t obligations. Bank intends to sell these prior to maturity

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Fin 286Assets (continued)

LoansLargest portion of assets form most banksIncludes consumer, real estate, business, ag production, leases and foreign loans. Most statements include a gross loan amount and an allowance for loan loss (balance is built with deductions from current income, when a loan is uncollectable then balance is reduced. Therefore both the gross account and loss account change. And net income is not impacted.)

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Fin 286Assets (continued)

Federal Funds sold and Securities Purchased under Repurchase agreements

Short term loans…

Customers Liability on AcceptancesA line of credit provided via a letter of credit backing purchases by the customer.

Miscellaneous AssetsBank buildings, equipment, prepaid insurance etc.

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www.FDIC.gov

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Fin 286Assets, % of Total Assets

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

1935 1945 1955 1965 1975 1985 1995 2005

Cash Loans Investment Sec

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FDIC

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Fin 286Loans, % of Total Loans

0

0.1

0.2

0.3

0.4

0.5

0.6

Jul-46 Mar-60 Dec-73 Aug-87 Apr-01

C&I Loans Real Estate Loans Consumer Loans

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FDIC

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Fin 286Loan Portfolios 2000

Real Estate62.77%

RealEstate39.85%0

0.1

0.2

0.3

0.4

0.5

0.6

1940 1950 1960 1970 1980 1990 2000

Real Estate Depository InstitutionsAgricultural Production Commercial And IndustrialIndividuals

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Fin 286Liabilities

Largest portion of liabilities is depositsAverage ratio of equity to assets = 8.49% (91.51% of asses are financed by some type of debt..)Approximately 21% of deposits are transaction accounts (checkable deposits that cost little or no interest)Retail savings and time deposits have been declining due to competition form money market mutual funds

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Fin 286Deposits

Non-interest bearing demand depositsChecking accounts with unlimited check writing

Savings depositsNOW accounts

Held only by individuals and nonprofit institutions pay interest and permit checks

Money market deposit accountsLimited check writing ability and can pay interest

Time depositsCD’s with fixed maturity and interest rate

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Fedral Reserve Board

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Fin 286Liabilities, % of Total

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

1935 1945 1955 1965 1975 1985 1995 2005

Deposits Borrowed Funds Subordinated Notes Other

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Fin 286Assets Vs. Liabilities

Generally liabilities tend to be of shorter maturity than assets. This introduces interest rate risk and liquidity risk for depository institutions.

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Fin 286Equity

Usually about 8 to 10 % of liabilities and equityGenerally equity held is close to the minimum amount set by regulations

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Fin 286Off - Balance Sheet Activities

Assets and Liabilities that will appear on the balance sheet or income statement if a contingent event occurs.Motivated by both earnings and regulatory (tax avoidance) incentivesExpose the bank to added risk, but do not show up on traditional financial reports.

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Fin 286OBS Activities continued

Standby Credit Agreements- bank pledges to guarantee repayment of a customers’ loan received from a third partyInterest rate swaps – exchange interest payments on debt securities with another partyFinancial futures and optionsLoan commitments – pledge to lend up to a certain amount of fundsForeign exchange rate contracts

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Fin 286

Other Fee Generating Activities

Trust ServicesManagement of estate assets and pension fund assets

Correspondent BankingProviding banking services to smaller institutions that do not have the staff or expertise in those services.

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Fin 286Savings Associations

Primarily deal with household saving and mortgages. Financing long term mortgages with short term deposits has been helped by a traditionally upward sloping yield curve.

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Fin 286S&L Regulation

Traditionally restricted in the type of accounts they could offer the regulation in the early 1980’s allowed S&L’s to become more competitive with commercial banks. Most notably the repeal of Regulation Q. Also allowed to offer NOW accounts and more market sensitive money market accounts

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Fin 286Savings Banks

Originally organized as a mutual organization that also focused on mortgage lendingMany are now switching to stock ownership

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Fin 286Credit Unions

Nonprofit depository institutions that are mutually organized.Members must belong to a specific similar occupation, association or live in a given community.Earnings are designated to paying higher rates of return on deposits and to charging lower rates of interest on loans.

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Fin 286

Financial Analysis ofDepository Institutions

Finance 129Drake University

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Fin 286Basic Financial Statements

Report of ConditionBalance Sheet

Report of IncomeIncome Statement

Funds Flow StatementSources and Uses of Funds

Statement of Stockholders Equity

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Fin 286

Balance Sheet

Financial Outputs(uses of Bank Funds or Assets)

Cash (primary reserves)

Liquid Security Holdings(secondary Reserves)

Investments in SecuritiesLoans

ConsumerReal EstateAgFin InstitutionsMics Loans

Misc

Financial Inputs(Sources of Funds or

Liabilities and Owners Equity)

Deposits from PublicDemandNOW’sMoney marketsSavingsTime

Nondeposit BorrowingsEquity Capital

StockSurplusRetained EarningsCapital reserves

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Fin 286Balance Sheet continued

As with any balance sheetAssets = Liabilities + Owners Equity

orAccumulated uses Accumulated

sourcesof bank funds of bank funds

=

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Fin 286

Balance Sheet Components Assets

The Cash Accountincludes: Cash in the vault, deposits with other banks, cash items in the process of collection and reserve accounts with the Federal ReserveTraditionally banks attempt to keep this account as low as possiblePrimary reserves since it is banks first line of defense against withdrawls

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Balance Sheet Components Assets

Investment Securities: the liquid portionShort term government securities and money market instrumentssecondary reserves

Investment Securities Income Generating Portion

Taxable and nontaxableCan be recorded at original cost or market value or the lower of the twotrading account securities

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Fin 286

Balance Sheet Components Assets

LoansLargest AssetGenerally broken down by purpose of loansGross loans -- total of all outstandingAllowance for Loan losses (ALL account)

PLL on income statement

Gross minus ALL = Net LoansAllocated Transfer RisksUnearned Discounts

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Fin 286

Balance Sheet Components Assets

ALL accountoften divided into two sections, specific reserves, and general reservesTax reform Act of 1986

only loans actually declared uncollectable can be expensed through the ALL accountsdecreased use of ALL accountsPermanent capital

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Fin 286

Balance Sheet Components Assets

Federal Funds Sold and Securities Purchased under Resale AgreementsCustomers liability AcceptancesMisc Assets

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Fin 286

Balance Sheet Components Liabilities

DepositsNoninterest bearingSavingsNOW accountsMoney Market AccountsTime Deposits

Borrowings from Nondeposit sourcesCapital Accounts

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Fin 286Book vs. “Fair Value”

Banks have traditionally recorded balance sheet entries at original cost (book value or historical cost accounting -- ammoritzed cost)Implies that interest rate fluctuations would not impact valuesFair Value -- current market value

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Fin 286

Arguments against Fair Value

Possible increase in the volatility of earningsgreater instability in stock prices of banksloss of bank capital cushionslack of resale market

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Fin 286

Income Statement or Report of Income

Revenue ItemsInterest Income (interest generated from loans normally accounts for most income (generally more than 2/3)Non interest income (fee income) Increasingly important. No interest income also includes securities gains (or losses). Now subject to standard tax rate

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Fin 286

Report of IncomeExpenses

Interest Expenselargest expense is interest paid on deposits, often between 50 and 60% of total expensesfed funds borrowing and repurchase agreements have grown in importance.

Non interest expensewages, salaries and other personnel expenses+

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Fin 286Income

Net Interest Income = Total Interest Income -Total Interest ExpenseAlso referred to as interest margin

Net incomeAdds non interest income and subtracts no interest expense to interest income.

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Fin 286Income Statement

Interest IncomeInterest on loans, Interest on securities, Other

Interest ExpenseDeposit Interest, Short term debt, Long Term debt

Net Interest IncomeNon interest Income

Service Charges, Trust Department, OtherNon interest Expense

Wages, Net occupancy, Other operating expensesIncome before taxesProvision for income taxes

Net income after taxes

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Fin 286Funds - Flow Statement

Funds from operations+ decreases in bank assets+ increases in bank liabilitiesFunds provided to the bank

Dividends paid out to stockholders

+ increase in banks assets+ decreases in bank

liabilitiesFunds Used by the bank

=

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Fin 286Capital Account Statement

Beginning Balance + Net income - Dividends paid to shareholders+ New Shares of Stock issued - Purchases of treasury stockBalance at end of period

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Fin 286

Common Characteristics of Banks

Financial Statements

Heavy dependence on borrowed fundsEarnings are exposed to risk if borrowings cannot be repaid

Growing use of nondeposit borrowingsBank must hold a significant proportion of high quality and marketable securities

Financial Assets are more important than plants and equipment

few fixed costs and limited use of operating leverage.

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Fin 286

Evaluating and Measuring Bank Performance

Going to use ratio analysis to evaluate the performance of depository institutions

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Fin 286ROE and ROA

ROE measure the rate of return flowing to the banks shareholders

ROA measures managerial efficiency -- how well management converts assets into net earnings

capitalequity total

safter taxe incomeNet ROE

Assets Total

safter taxe incomeNet ROA

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Relationship between ROE and ROA

Assets Total

Assets Total

Equity Total

IncomeNet ROE

MultiplierEquity ROA

Equity Total

Assets Total

Assets Total

IncomeNet ROE

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Fin 286DuPont Identity

Equity Total

AssetsROA ROE

Assets Total

Income Total

Income Total

IncomeNet

Assets Total

IncomeNet ROA x

nUtilizatio

Asset x

Margin

ProfitROA

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Fin 286Decomposition

Multiplier

Equity

onUtilitzati

Asset

Margin

ProfitROE

MultiplierEquity ROAROE

nUtilizatio

Asset x

margin

ProfitROA

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Fin 286Decomposition

Equity MultiplierReflects the leverage or financing policies (the choice of debt or equity)

Profit MarginReflects the effectiveness of expense management control

Asset utilizationReflects the ability to manage the mix and yield on the banks assets

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Example changes through time

Year ROE Profit Mar Asset Util Equity Mult

2000 13.91% 13.73% 8.34% 11.88

1998 12.79% 12.17% 8.93% 11.95

1996 13.87% 12.88% 8.87% 12.14

1994 14.31% 13.37% 8.33% 12.85

1992 12.18% 10.01% 9.15% 13.30

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Rose, Commercial Bank Managment McGraw Hill

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Fin 286

Average returns on Banks 1999

< $100 Million

$100 Million to $1 Billion

$1Billion to $10 Billion

> $10 Billion

ROA 1.01% 1.36% 1.49% 1.28%

ROE 9.07% 14.24% 16.02% 15.97%

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Asset Utilization and Profit Margin

Both reflect Management decisions regarding:

Mix of funds raised and investedSize of Bankcontrol of operating ExpensesPricing of ServicesMinimization of tax liability

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Fin 286Asset Utilization

Assets Total

IncomeInterest Non IncomeInterest

Assets Total

Income Total

nUtilizatio

Asset

Assets Earning

of Volume

AssetEach

ofn Compositio

AssetEach

on Yield

Assets TotalAssets Earning

Assets TotalAssetEach

of $

Assets Total

Asseteach on

EarnedInterest

IncomeInterest

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Fin 286Asset Utilization

Assets Total

IncomeInterest Non IncomeInterest

Assets Total

Income Total

nUtilizatio

Asset

Assets TotalInc NonInterst

Other

Assets Total

Revenue

Trading

Assets TotalFees amd

Charges Service

Assets Total

Income

Fudiciary

IncomeInterest Non

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Fin 286Profit Margin

Income

TotalTaxes

Income

Income

TotalExpense

tNonInteres

Income

TotalLoanLosses

forProvision

Income

TotalExpense

Interest

Income Total

IncomeNet

Margin

Profit

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Fin 286Decomposition of ROA

Assets

TotalLosses Loan

For Provisons

Assets

TotalExpense

InterestNon

Assets

TotalExpense

Interest

Income

TotalExpenses

Total

Ratio

Expense

Assets TotalTaxes

Income

Expenses

Total

Revenue

Total

Assets Total

IncomeNet ROA

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Fin 286

Decomposition of ROA Part 2

Assets TotalIncome

SpecialNet

Expense

InterestNon

Income

InterestNon

Expense

Interest

Income

Interest

Assets

TotalIncome

Net

Assets TotalTaxes

Income

Expenses

Total

Revenue

Total

Assets Total

IncomeNet ROA

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Fin 286

Decomposition of ROA Part 2

Assets Total

Income

SpecialNet

Expense

InterestNon

Income

InterestNon

Expense

Interest

Income

Interest

Assets

TotalIncome

Net

Assets TotalExpense

InterestNon

Income

InterestNon

margin

tNoninteres

Assets TotalExpense

Interest

Income

Interest

Margin

Interest

Net

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Fin 286Other Important Ratios

assets Earning

incomeinterest Net Margin

InterestNet

Assets BearingInterest

ExpenseInterest

Assets Earning

IncomeInterest Spread

Assets Total Average

Incomet Noninteres - Expenset Noninteres

Ratio

Burden

Incomet Noninteres Incomeinterest Net

Expenset Noninteres

Ratio

Efficiency

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Obtaining Information on Banks

Data for banks is available from the Uniform Bank Performance Report (UBPR).UBPR developed by the Fed, FDIC, and office of the comptroller of Currency so that there would be a standardized way to compare institutions.Also peer group and state reports for comparable banks.

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Fin 286UBPR

Goal is to provide uniform reporting of informationDeveloped by the Federal Financial Institutions Examination Council’s quarterly reports.Available online at www.FFIEC.org

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Fin 286Using the UBPR

Compare across yearseach report has 5 years of dataYear end or current quarter plus 1 year prior to current and three previous years

Compare to peer groupsalso available are peer groups reports based on both size of bank and geographic locationAllows you to benchmark

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Fin 286UBPR: Security National

Table 5-5 from RoseTotal Assets increased by $600 million, rate of 9.3%all types of loan rose except ones hit by economic downturn (lines 1-11)decrease in short term securities, increase in long term, maybe seeking higher yields (lines 14 and 18)Large increase in US treasury Securities (line 24) and municipal securities (line 25)

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Fin 286UBPR: Security National

Table 5-6 in RoseDeposits increased except for sectors hit by economic down turn.Large increase in need for federal funs and repurchase agreements (line 10). Indicate that loans and securities grew faster than deposits. Also may reduce profitability since it is an expensive source of funds.

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Fin 286UBPR: Security National

Table 5-7 in RoseLoans increased as a percentage of assets, but on average still less than peer group (line 1). Loans are high yielding -- may reduce income.Holds more long term 18.57% than average of 8.95% (line 5). Higher market risk due to interest rate sensitivity. Fewer short term securities 2.54% than average 3.41% (line 10).Low amount of non interest bearing cash deposits from other banks and deposits due (line 13) indicates higher liquidity risk. May force increased borrowing in fed funds market. And increased liquidity risk

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Fin 286UBPR: Security National

Table 5-7 in RoseSmaller portion of checkable deposits which are a cheap source of funds (line 19)Also smaller portion of core deposits (demand, NOW, savings accounts, money market and time deposits less than 100,000) (line 23). Assumed to be stable source of funds decreasing chance of illiquidity

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DrakeDrake University

Fin 286UBPR: Security National

Table 5-8 in RoseInterest income increased by 7 million or 1.2% (line 15), interest expense increase by 18 million or 14.6% (line 23)Net interest income declined by 6.3% (line 24)Interest on borrowed money increased by 10% (line 20)Interest paid on large CD’s increased by 14.6% (line16) Provision for loan losses increased by 83% (line 28)Non interest income increased by 22.2% (line 25)Net income decreased by 28.3% (line 37)

Page 84: Drake DRAKE UNIVERSITY Fin 286 Depository Institutions.

DrakeDrake University

Fin 286UBPR Sec Nat:

Recent Year:NIM = (165/6951) = 2.37%

Last yearNIM = (176/6361) = 2.77%

Peer Group (table 5-9)NIM Recent year 3.91% Last year = 3.66%

The industry increased while security national decreased, both much lower than average

Assets TotalExpense

Interest

Income

Interest

Margin

Interest

Net

Page 85: Drake DRAKE UNIVERSITY Fin 286 Depository Institutions.

DrakeDrake University

Fin 286

UBPR Security National (Rose)

Current Tot assets 6951 Tot equity 482 Net income

33

Last 6361 381 46

MultiplierEquity ROA

Equity Total

Assets Total

Assets Total

IncomeNet ROE

6955.16 .007236381

6361

6361

46 1208.

381

46 ROE

4212.14 .00474482

6951

6951

33 06846.

482

33 ROE

previous

current

xx

xx

Page 86: Drake DRAKE UNIVERSITY Fin 286 Depository Institutions.

DrakeDrake University

Fin 286UBPR: Security National

From last slide:ROA declined and the equity multiplier declinedHigher equity multiplier is riskier, but here the decrease is helping to decrease profitability.Alternative EM definition: 1/EM is the % of assets that can default before insolvency

Page 87: Drake DRAKE UNIVERSITY Fin 286 Depository Institutions.

DrakeDrake University

Fin 286UBPR: Security National

Current: Tot assets 6951 Tot equity 482 Net inc 33 Tot inc 604 Last: 6361 381 46

593

Multiplier

Equity

onUtilitzati

Asset

Margin

ProfitROE

Equity Total

Assets Total

Assets Total

Income Total

Income Total

IncomeNet ROE xx

6955.16 0932.0 0776.0381

6361

6361

593

593

46 ROE

4212.14 0.0869 .05460 482

6951

6951

604

604

33 ROE

previous

current

xxxx

xxxx

Page 88: Drake DRAKE UNIVERSITY Fin 286 Depository Institutions.

DrakeDrake University

Fin 286UBPR Security National

Asset Utilization decreased form .0932 to .0869 and profit margin declined from .0776 to .0546Decline in profit margin and equity multiplier are the largest.Profit margin hurt by increased provision for loan losses and increase in applicable income taxesPretax income declined by 11% Net income declined by 28% higher tax burden and lower adjustment

Page 89: Drake DRAKE UNIVERSITY Fin 286 Depository Institutions.

DrakeDrake University

Fin 286UBPR Security National

current non interest expense 72 Tot income 604last 70 593

Burden (noninterest expense - noninterest income) from 52 to 50 while asset grew.

Incomet Noninteres Incomeinterest Net

Expenset Noninteres

Ratio

Efficiency

1180.Ratio Eff 1192.Ratio Eff lastcurrent