Sample Bank Modeling Template

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A sample Bank Modeling Template

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Operating ModelVALLEY NATIONAL BANCORP ANNUAL FORECAST MODEL($ in thousands, except per share data)2006A2007A2008A2009A2010A201120122013201412/31/0612/31/0712/31/0812/31/0912/31/1012/31/1112/31/1212/31/1312/31/14NotesBALANCE SHEETAssetsCash and due from banks305,678302,629308,601317,761327,193336,904See scheduleInterest bearing deposits with banks355,65963,65763,65763,65763,65763,657See schedule. Primarily with the NY Fed; model balancerInvestment securities2,969,8192,991,1693,140,7273,297,7643,462,6523,635,785See scheduleLoans held for sale at fair value25,49258,95838,57539,72040,89942,113See scheduleGross loans9,370,0719,365,7959,643,7879,930,03010,224,76910,528,256See scheduleLess - Allowance for loan losses(101,990)(124,704)(120,085)(116,085)(113,085)(113,085)See scheduleNet loans9,268,0819,241,0919,523,7029,813,94510,111,68410,415,172See schedulePremises and equipment net266,401265,570265,570265,570265,570265,570Straight-line (SL) projection assumes new purchases equal depreciation/salesBank owned life insurance304,031304,956304,956304,956304,956304,956SL. Assume appreciation offset by benefit proceeds. BOLI BOP + Change in surrender value (IS income) - Benefit proceeds (CFS investing inflow) = BOLI EOP.Accrued interest receivable56,24559,12659,12659,12659,12659,126SL. Argument can be made to grow as % of total interest income (as interest increases, so would the associated receivables).Due from customers on acceptances outstanding6,9856,0286,0286,0286,0286,028SL. Primarily used in the trade of goods. For example, a manufacturer needs to be paid by a retailer: The retailer's bank, under certain financial conditions between the bank and its customer, accepts to pay for the goods. The bank is substituting its creditworthiness for that of its customer in order to assure the manufacturer of payment after shipping the goods. The acceptance is then sent to the manufacturer. The bank records a liability (it owes the manufacturer $ now, but it records a corresponding asset that will be paid back by its customer, the retailer.FDIC loss-share receivable0.089,35969,35949,35929,3599,359See schedule.Goodwill296,424317,891317,891317,891317,891317,891SL. No amortization of GW; assume no substantial new purchases or impairmentsOther intangible assets net24,30525,65025,65025,65025,65025,650SL. Assume new purchases equal amortization/salesOther assets405,033417,742417,742417,742417,742417,742SL. Comprised primarily of net deferred tax assets, federal reserve and federal home loan bank stock, derivatives, foreclosed and other assets. (The Federal Reserve Banks issue shares of stock to member banks. However, owning Federal Reserve Bank stock is quite different from owning stock in a private company. The Federal Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the system. The stock may not be sold or traded or pledged as security for a loan; dividends are, by law, limited to 6 percent per year)Total Assets14,284,15314,143,82614,541,58514,979,16915,432,40715,899,952LiabilitiesTotal deposits9,547,2859,363,6149,643,7879,930,03010,224,76910,528,256See scheduleShort-term borrowings216,147192,318229,407253,916272,615286,930See schedule; Primarily repos for VLY; model balancerLong-term borrowings2,946,3202,933,8582,989,5743,078,3093,169,6783,263,759See scheduleJunior subordinated debentures issued to capital trusts181,150186,922186,922186,922186,922186,922SL. Holding company debt.Bank acceptances outstanding6,9856,0286,0286,0286,0286,028SL. See corresponding asset description above.Accrued expenses and other liabilities133,412165,881165,881165,881165,881165,881SL. Argument can be made to grow as % of non-interest expense on ISTotal Liabilities13,031,29912,848,62113,221,59913,621,08614,025,89414,437,777Total Shareholders' Equity1,252,8541,295,2051,319,9861,358,0831,406,5131,462,175BOP + Net income - dividends = EOPTotal Liabilities and Shareholders' Equity14,284,15314,143,82614,541,58514,979,16915,432,40715,899,952Balance Check0.00.00.00.00.00.0INVESTMENT SECURITIESInvestment securities2,624,4152,969,8192,991,1693,140,7273,297,7643,462,6523,635,785Comprised of held to maturity; available for sale; and trading securities. Banks always disclose their investment composition in the footnotes; a large portion of VLY's securities are RMBS.% growth13.16%0.72%5.00%5.00%5.00%5.00%Difficult to project growth rates definitively. We use historical rates as guide,LOANSGross loans (Covered and non-covered)8,331,6858,496,22110,143,6909,370,0719,365,7959,643,7879,930,03010,224,76910,528,2562010 gross loans include loans covered by the FDIC in a 2010 loss-share arrangement.% growth1.97%19.39%(7.63%)(0.05%)2.97%2.97%2.97%2.97%We use a historical cagr to project loan growth. This projection will also affect our deposit liabilities, which are needed to support loan volume. VLY discloses the composition of its loan portfolio in the footnotes, so if analysts have conviction about particular loan portfolios (residential vs. commercial loans) as more detailed analysis can be performed.Loans held for sale25,49258,95838,57539,72040,89942,113Loans held for sale as % of gross loans0.27%0.63%0.40%0.40%0.40%0.40%Use the historical relationship as a guideCREDIT LOSS RESERVEAllowance for credit losses - BOP75,18874,71874,93594,738103,655126,504121,885117,885114,885Reference prior period ending balancePlus: Net charge-offs (enter as -)(9,740)(11,658)(19,889)(39,075)(26,607)(34,619)(24,000)(18,000)(15,000)Project based on ratio of NCO/prior year provision. NCO are comprised of charge-offs, net of recoveries of previously charged off loans.Plus: Provision for credit losses (enter as +)9,27011,87528,28247,99249,45630,00020,00015,00015,000Our assumption for reduction in provision assumes continued normalization of credit environment to pre-crisis levels.Plus: Acquisitions0.00.011,4100.00.00.00.00.00.0Assume 0Allowance for loan losses (reserves) - EOP74,71874,93594,738103,655126,504121,885117,885114,885114,885Plus: Allowance for letter of credit2,2711,4941,6651,8001,8001,8001,8001,800Straight-lineReported Allowance74,71872,66493,244101,990124,704120,085116,085113,085113,085DriversNCO to prior year provision125.76%167.49%138.16%55.44%70.00%80.00%90.00%100.00%During credit crisis in 2008 and 2009, NCOs were higher than prior period provisions. Larger provisions were then taken in 2009 and 2010, while NCOs declined as environment normalized. We are assuming normalization of provisions, and thus the relationship between NCOs and prior period provisions are also expected to increase to historical, pre-crisis levels.Average loans8,262,7398,261,1119,386,9879,705,9099,474,9949,553,5579,826,05610,117,70910,418,019NCO / average loans (includes loans held for sale)(0.12%)(0.14%)(0.21%)(0.40%)(0.28%)(0.36%)(0.24%)(0.18%)(0.14%)Although not used directly in our analysis, the "NCO ratio" is a sanity-checkFDIC LOSS SHARE RECEIVABLEFDIC loss share receivable - BOP0.0108,00089,35969,35949,35929,359Net reimbursement(18,641)(20,000)(20,000)(20,000)(20,000)We use historical reimbursement as a guide.FDIC loss share receivable - EOP0.089,35969,35949,35929,3599,359BOP + accretion and increase due to impairment of covered loans - FDIC reimbursements = EOP.DEPOSITSGross loans - EOP8,331,6858,496,22110,143,6909,370,0719,365,7959,643,7879,930,03010,224,76910,528,256Deposits - EOP8,487,6518,091,0049,232,9239,547,2859,363,6149,643,7879,930,03010,224,76910,528,256Ratio of gross loans / deposits98.16%105.01%109.86%98.14%100.02%100.00%100.00%100.00%100.00%Deposits drive the amount of loans a bank can make, and VLY maintains an internal limitation on loans at 120% of deposits. For projection purposes, we use the historical relationship, to project deposits.DEBTLong-term borrowings2,946,3202,933,8582,989,5743,078,3093,169,6783,263,759as a % of gross loans31.44%31.33%31.00%31.00%31.00%31.00%NET INTEREST INCOME (NII)Balance sheet itemsLoans - EOP9,395,5639,424,7539,682,3629,969,75010,265,66810,570,369Reference LHFS and Gross Loans from schedule above.Investments - EOP2,969,8192,991,1693,140,7273,297,7643,462,6523,635,785Reference Investment Securities from schedule above.Federal funds sold and other interest bearing deposits - EOP355,65963,65763,65763,65763,65763,657Reference from the BS; projections will be zero until this balance sheet item is filled out laterTotal interest earning assets - EOP12,721,04112,479,57912,886,74613,331,17113,791,97714,269,811Total interest earning assets - Average12,384,62513,031,64612,679,75612,683,16313,108,95913,561,57414,030,894% of total deposits that are interest bearing74%Interest earning deposits - EOP7,106,5106,969,7957,178,3417,391,4067,610,7957,836,695Adjust total BS deposits by interest earning deposits assumption.ST borrowings - EOP216,147192,318229,407253,916272,615286,930Reference from the BS; projections will be zero until this balance sheet item is projected later.LT borrowings - EOP2,946,3202,933,8582,989,5743,078,3093,169,6783,263,759Reference from the LT Debt schedule above.Junior subordinated debentures issued to capital trusts181,150.0186,922.0186,922.0186,922.0186,922.0186,922.0Reference from the BS; projections will be zero until this balance sheet item is filled out laterTotal interest bearing liabilities - EOP10,450,12710,282,89310,584,24510,910,55311,240,01011,574,307Total interest bearing liabilities - Average10,355,76010,585,80010,363,96910,433,56910,747,39911,075,28211,407,15910,366,510.210,433,568.9Growth ratesInvestments- EOP0.72%5.00%5.00%5.00%5.00%Deposits - EOP(1.92%)2.99%2.97%2.97%2.97%ST borrowings - EOP(11.02%)19.29%10.68%7.36%5.25%LT borrowings - EOP(0.42%)1.90%2.97%2.97%2.97%NII driversInterest earning asset yield (IEA yield)5.94%5.51%5.38%5.40%5.65%5.90%6.15%Sum of NIS and IBL cost. Implies higher LT rates but at lower rate of increase than ST ratesInterest bearing liability cost (IBL cost)2.98%2.48%2.07%2