Question 1

What must net noninterest income (net of noninterest expense)be in order for FNB to have a 12 percent ROE? Based on your answer,must FNB be performing better or worse than the industry average in this area? Explain.

Accepted Answer

NI/Equity = 0.12; NI/$125 = 0.12,so requ...

Question 2

The AU ratio measures the bank's ability to ________ and the PM ratio measures the bank's ability to ________.

Accepted Answer

A)  control expenses; generate income from assets
B)  generate income from assets; control expenses
C)  maximize interest revenue; minimize interest expense
D)  control leverage; minimize physical plant
E)  None of these choices are correct.

Question 3

If a bank has more purchased funds than the average bank,you would not be surprised to see a higher than average ________ ratio.

Accepted Answer

A)  provision for loan loss
B)  tax
C)  noninterest expense
D)  interest expense
E)  None of these choices are correct.

Question 4

Fernando Bank has interest expense of $150 million,earning assets of $1,400 million and a NIM of 5.00 percent. The bank also has interest-bearing liabilities of $1,100 million. Fernando Bank's spread is

Accepted Answer

A)  1.10 percent.
B)  1.65 percent.
C)  1.94 percent.
D)  2.08 percent.
E)  2.16 percent.

Question 5

All but which one of the following is an example of noninterest income or noninterest expense?

Accepted Answer

A)  Income from service charges on deposits
B)  Income from trust services
C)  Gains and losses from trading account assets
D)  Earnings on securities held for investment
E)  Salaries and benefits paid to employees

Question 6

Blue Ridge Bank has a PM of 12 percent,an interest income to total assets ratio of 6.00 percent,and a noninterest income to assets ratio of 1.50 percent. Blue Ridge also has $9 in assets per dollar in equity capital. Blue Ridge's ROE is

Accepted Answer

A)  7.50 percent.
B)  9.00 percent.
C)  8.10 percent.
D)  6.48 percent.
E)  5.75 percent.

Question 7

The lower the interest expense ratio,the provision for loan loss ratio,the noninterest expense ratio,and the tax ratio the ________ the ________.

Accepted Answer

A)  lower; PM
B)  higher; PM
C)  lower; AU
D)  higher; AU
E)  lower; EM

Question 8

Core deposits are deposits that are

Accepted Answer

A)  at the bank solely for the interest rate earned.
B)  very stable funds sources.
C)  typically for larger denominations than hot money sources.
D)  very frequently turned over.

Question 9

Purchased funds include all but which one of the following?

Accepted Answer

A)  Brokered deposits
B)  Wholesale CDs
C)  Fed funds purchased
D)  Repurchase agreements
E)  Demand deposits

Question 10

C&I loans are loans to businesses used to finance capital needs,equipment purchases,and plant expansions.

Accepted Answer

A) True 
 B)False

Question 11

If the average net interest margin for this type of bank is 4.65 percent,then,ceteris paribus,this particular bank is performing

Accepted Answer

A)  the same as average because this bank has a NIM of 4.65 percent.
B)  better than average because this bank has a NIM of 6.55 percent.
C)  poorer than average because this bank has a NIM of 4.08 percent.
D)  better than average because this bank has a NIM of 5.23 percent.
E)  One can't determine with the information given.

Question 12

In ratio analysis,the profit margin times the asset utilization ratio equals return on assets.

Accepted Answer

A) True 
 B)False

Question 13

A bank can raise capital by:

Accepted Answer

A)  Offering long-term CDs
B)  Issuing Stock
C)  Retaining earnings
D)  Both issuing stocks and offering long-term CDs
E)  Both issuing stocks and retaining earnings

Question 14

A construction firm cannot obtain the necessary permits to begin building a shopping mall until it can show it either has or will have the necessary funding to complete the project. The firm may ask a bank for which of the following to allow it to obtain the permits?
I. Commercial letter of credit
II. Loan commitment
III. Credit line
IV. Repurchase agreement

Accepted Answer

A)  I or II
B)  II or III
C)  II or IV
D)  III or IV
E)  I or IV

Question 15

Loans are the major asset on a bank's balance sheet,and they generate the largest amount of revenue.

Accepted Answer

A) True 
 B)False

Question 16

Cash in the process of collection is

Accepted Answer

A)  a deposit at another financial institution.
B)  a Fed funds transaction.
C)  checks the bank owes other institutions that have not yet been paid.
D)  checks that the bank is owed but has not yet collected.
E)  equity capital.

Question 17

Banks generally pay higher interest rates on NOW accounts than on MMDAs.

Accepted Answer

A) True 
 B)False

Question 18

How has the negotiable feature of wholesale CDs improved banks' ability to manage their liquidity?

Accepted Answer

Time deposits carry a substantial intere...

Question 19

Composite rating 5 is the rating for the soundest financial institutions.

Accepted Answer

A) True 
 B)False

Question 20

The First Bank of the Ozarks generates $0.0155 dollars of net income per dollar of assets and it has a profit margin of 12.25 percent. How much operating income per dollar of total assets does First Bank generate?

Accepted Answer

A)  12.50 percent
B)  12.65 percent
C)  12.75 percent
D)  12.85 percent
E)  12.95 percent

Exam 12: Commercial Banks Financial Statements and Analysis

Blue Ridge Bank has a PM of 12 percent,an interest income to total assets ratio of 6.00 percent,and a noninterest income to assets ratio of 1.50 percent. Blue Ridge also has $9 in assets per dollar in equity capital. Blue Ridge's ROE is

Correct Answer
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Correct Answer
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If a bank has more purchased funds than the average bank,you would not be surprised to see a higher than average ________ ratio.

Correct Answer
verified

All but which one of the following is an example of noninterest income or noninterest expense?

Correct Answer
verified

Core deposits are deposits that are

Correct Answer
verified

Banks generally pay higher interest rates on NOW accounts than on MMDAs.

Correct Answer
verified

Composite rating 5 is the rating for the soundest financial institutions.

Correct Answer
verified

How has the negotiable feature of wholesale CDs improved banks' ability to manage their liquidity?

Correct Answer
verified
Time deposits carry a substantial intere...
View Answer

The First Bank of the Ozarks generates $0.0155 dollars of net income per dollar of assets and it has a profit margin of 12.25 percent. How much operating income per dollar of total assets does First Bank generate?

Correct Answer
verified

Loans are the major asset on a bank's balance sheet,and they generate the largest amount of revenue.

Correct Answer
verified

If the average net interest margin for this type of bank is 4.65 percent,then,ceteris paribus,this particular bank is performing

Correct Answer
verified

C&I loans are loans to businesses used to finance capital needs,equipment purchases,and plant expansions.

Correct Answer
verified

Cash in the process of collection is

Correct Answer
verified

The AU ratio measures the bank's ability to and the PM ratio measures the bank's ability to .

Correct Answer
verified

A bank can raise capital by:

Correct Answer
verified

Fernando Bank has interest expense of $150 million,earning assets of $1,400 million and a NIM of 5.00 percent. The bank also has interest-bearing liabilities of $1,100 million. Fernando Bank's spread is

Correct Answer
verified

Purchased funds include all but which one of the following?

Correct Answer
verified

In ratio analysis,the profit margin times the asset utilization ratio equals return on assets.

Correct Answer
verified

The lower the interest expense ratio,the provision for loan loss ratio,the noninterest expense ratio,and the tax ratio the the .

Correct Answer
verified

What must net noninterest income (net of noninterest expense)be in order for FNB to have a 12 percent ROE? Based on your answer,must FNB be performing better or worse than the industry average in this area? Explain.

Correct Answer
verified
NI/Equity = 0.12; NI/$125 = 0.12,so requ...
View Answer

Exam 12: Commercial Banks Financial Statements and Analysis

Blue Ridge Bank has a PM of 12 percent,an interest income to total assets ratio of 6.00 percent,and a noninterest income to assets ratio of 1.50 percent. Blue Ridge also has $9 in assets per dollar in equity capital. Blue Ridge's ROE is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a bank has more purchased funds than the average bank,you would not be surprised to see a higher than average ________ ratio.

Correct AnswerverifiedShow Answer

All but which one of the following is an example of noninterest income or noninterest expense?

Correct AnswerverifiedShow Answer

Core deposits are deposits that are

Correct AnswerverifiedShow Answer

Banks generally pay higher interest rates on NOW accounts than on MMDAs.

Correct AnswerverifiedShow Answer

Composite rating 5 is the rating for the soundest financial institutions.

Correct AnswerverifiedShow Answer

How has the negotiable feature of wholesale CDs improved banks' ability to manage their liquidity?

Correct AnswerverifiedTime deposits carry a substantial intere...View AnswerShow Answer

The First Bank of the Ozarks generates $0.0155 dollars of net income per dollar of assets and it has a profit margin of 12.25 percent. How much operating income per dollar of total assets does First Bank generate?

Correct AnswerverifiedShow Answer

Loans are the major asset on a bank's balance sheet,and they generate the largest amount of revenue.

Correct AnswerverifiedShow Answer

If the average net interest margin for this type of bank is 4.65 percent,then,ceteris paribus,this particular bank is performing

Correct AnswerverifiedShow Answer

C&I loans are loans to businesses used to finance capital needs,equipment purchases,and plant expansions.

Correct AnswerverifiedShow Answer

Cash in the process of collection is

Correct AnswerverifiedShow Answer

The AU ratio measures the bank's ability to ________ and the PM ratio measures the bank's ability to ________.

Correct AnswerverifiedShow Answer

A bank can raise capital by:

Correct AnswerverifiedShow Answer

Fernando Bank has interest expense of $150 million,earning assets of $1,400 million and a NIM of 5.00 percent. The bank also has interest-bearing liabilities of $1,100 million. Fernando Bank's spread is

Correct AnswerverifiedShow Answer

Purchased funds include all but which one of the following?

Correct AnswerverifiedShow Answer

In ratio analysis,the profit margin times the asset utilization ratio equals return on assets.

Correct AnswerverifiedShow Answer

The lower the interest expense ratio,the provision for loan loss ratio,the noninterest expense ratio,and the tax ratio the ________ the ________.

Correct AnswerverifiedShow Answer

What must net noninterest income (net of noninterest expense)be in order for FNB to have a 12 percent ROE? Based on your answer,must FNB be performing better or worse than the industry average in this area? Explain.

Correct AnswerverifiedNI/Equity = 0.12; NI/$125 = 0.12,so requ...View AnswerShow Answer

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Time deposits carry a substantial intere...
View Answer

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The AU ratio measures the bank's ability to and the PM ratio measures the bank's ability to .

Correct Answer
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The lower the interest expense ratio,the provision for loan loss ratio,the noninterest expense ratio,and the tax ratio the the .

Correct Answer
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Correct Answer
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NI/Equity = 0.12; NI/$125 = 0.12,so requ...
View Answer