Interest Margin Analysis. The "Say Yes" Bank, the friendliest in the East, had a profit plan that showed a \(\$ 34.8\) million interest margin for 1998 . Results are in. The president, Ann Friendly, called the CFO, Jim Friendly, and asked how the bank could have earned so much more interest margin than expected. She recalls that some rates went up but others went down. She knows growth was higher than expected. Operating expenses were right on target. She plans to share the good news with all the other Friendlys working at the bank ( 43 at last count); but she needs some answers. Jim hands you the following data and a calculator.

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Explain how the bank earned \(\$ 0.7\) million more in interest margin in 1998 than planned. How much of this comes from having more assets than expected?

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($ in Millions) 1998 Budget Average Mix Interest Balance Percentage Amount Rate 1998 Results Average Mix Interest Balance Percentage Amount Rate Assets: Investments $300 33.3% $12.0 4.0% $250 26.9% $10.5 4.2% Short-term loans 300 33.3 27.0 9.0 400 43.0 35.6 8.9 Long-term loans. 300 33.3 30.0 10.0 280 30.1 26.6 9.5 Total..... $900 100.0% $ 69.0 7.7% $930 100.0% $72.7 7.8% Liabilities: Deposits.. $900 100.0% 34.2 3.8% $930 100.0% 37.2 4.0% Interest margin... $ 34.8 3.9% $35.5 3.8%