Answer the following questions in your memo:

1. What is the annual percentage change in fixed, floating, consumer and mortgage loans? Remember to multiply by 4 for annual percentages.

2. What is the annual percentage change in corporate and retail demand deposits, retail savings deposits, retail CDs and long-term retail deposits?

3. Estimate the quarterly interest income earned by the bank on its fixed rate, floating rate, consumer and mortgage loans using the formula: Interest Income = [Int. rate % x (Outstanding Loans less non-performing)]/4.

Example: To obtain the interest income of the banks fixed-rate loan, multiply the Interest Rate of Fixed rate loan (available in the FULL Balance Sheet report) times the net of outstanding Fixed-rate Loan for the quarter (available in the Summary or FULL Balance Sheet report) less nonperforming fixed-rate loans for the quarter (available in Loan Performance report). Since the interest rate is quoted per annum, divide by 4 to get the quarterly amount.

Compare your results to those reported in the Performance Basic Report.

4. Estimate the interest expense of retail CDs, savings account and long-term retail deposits using the same formula above: [Int. rate % x (outstanding deposits)]/4

5. Calculate the NIM, ROA and ROE. Net interest margin is defined as total interest income minus total interest expense over total average assets. Interest income should include interest on all loans and government bonds. Interest expense should include interest on all deposits and discount window advances. ROA is net income over average assets and ROE is net income over average equity. Average assets = Beginning plus ending assets divided by two. Average equity = Beginning plus ending net worth divided by two.

Decompose ROE as we did in class:

ROE = NI / NII x NII / TA x TA / TE

= (% ofNII as Profit) x (NIM) x (EM)

6. Calculate the Net Loss to Average Total Loans and Leases (NLLL) and Earnings Coverage of Net Losses (ECNL)

NLLL is net loan losses (gross losses minus recoveries) divided by average total loans (Beginning total loan balance plus ending total loan balance, divided by 2)

ECNL is pre-tax earnings (EBT) divided by net loan losses.

* HINT: Assume that the Recovery Rate on defaulted loans is 0%. That is once the loan defaults, 100% of the principal amount is lost. You can therefore use Total Defaulted Loans (Cell D302) as the Loan Loss amount. And, therefore Net Loan Losses = Gross Loan Losses since there is 0% Recovery.

7. You purchased (borrowed) $50 million of 360-day negotiable CDs. The total negotiable CDs in Balance Summary Report increased from $132 million in quarter 0 to $149 million in quarter 1. Explain. Hint: Look at the Balance Sheet Full report. Your most recent purchase is T+4.

\begin{tabular}{|c|c|c|c|} \hline & B & C & D \\ \hline 44 & Market Yield (T+7) & 5.98% & 5.98% \\ \hline 45 & Coupon Amount (T+7) & $62.30 & $62.30 \\ \hline 46 & Quarter T+8 & & \\ \hline 47 & Market Price (T+8) & $1,000.00 & $1,000.00 \\ \hline 48 & Market Yield (T+8) & 6.23% & 6.23% \\ \hline 49 & Coupon Amount (T+8) & $62.30 & $62.30 \\ \hline 50 & & & \\ \hline 51 & \multicolumn{2}{|l|}{ Economic Environment Report } & Q1 \\ \hline 52 & CAPITAL REQUIREMENTS & & \\ \hline 53 & Minimum Tier I + Tier II Capital to Risk Assets & 8.00% & 8.00% \\ \hline 54 & Minimum Tier I Capital to Risk Assets & 4.00% & 4.00% \\ \hline 55 & Minimum Tier I Capital to Total Assets & 3.00% & 3.00% \\ \hline 56 & DEPOSIT RESTRICTIONS & & \\ \hline 57 & Retail Demand Deposits & & \\ \hline 58 & Reserve Requirement & 10.00% & 10.00% \\ \hline 59 & Interest Rate Ceiling & 0.00% & 0.00% \\ \hline 60 & Corporate Demand Deposits & & \\ \hline 61 & Reserve Requirement & 10.00% & 10.00% \\ \hline 62 & Interest Rate Ceiling & 0.00% & 0.00% \\ \hline 63 & Savings Deposits & & \\ \hline 64 & Reserve Requirement & 0.00% & 0.00% \\ \hline 65 & Interest Rate Ceiling & 9,900.00% & 9,900.00% \\ \hline 66 & Retail CDs & & \\ \hline 67 & Reserve Requirement & 0.00% & 0.00% \\ \hline 68 & Interest Rate Ceiling & 9,900.00% & 9,900.00% \\ \hline 69 & Long-term Time Deposits & & \\ \hline 70 & Reserve Requirement & 0.00% & 0.00% \\ \hline 71 & Interest Rate Ceiling & 9,900.00% & 9,900.00% \\ \hline 72 & Negotiable CDs & & \\ \hline 73 & Reserve Requirement & 0.00% & 0.00% \\ \hline 74 & ASSET RISK WEIGHTS & & \\ \hline 75 & Required Reserves & 0.00% & 0.00% \\ \hline 76 & Excess Reserves & 0.00% & 0.00% \\ \hline 77 & Federal Funds Sold & 20.00% & 20.00% \\ \hline 78 & Fixed-rate Corporate Loans & 100.00% & 100.00% \\ \hline 4 & Economy & & \\ \hline \end{tabular} \begin{tabular}{|l|r|r|} \hline Required Reserves & 0.00% & 0.00% \\ \hline Excess Reserves & 0.00% & 0.00% \\ \hline Federal Funds Sold & 20.00% & 20.00% \\ \hline Fixed-rate Corporate Loans & 100.00% & 100.00% \\ \hline Floating-rate Corporate Loans & 100.00% & 100.00% \\ \hline Consumer Loans & 100.00% & 100.00% \\ \hline Mortgage Loans & 50.00% & 50.00% \\ \hline Bonds & 0.00% & 0.00% \\ \hline Fixed Assets & 100.00% & 100.00% \\ \hline OTHER RATES & & \\ \hline Annualized FDIC Premium (\% of insured deposits) & 0.28% & 0.28% \\ \hline Annualized Penalty Premium on Discount Window Advances & 5.00% & 5.00% \\ \hline Percentage of Nonperforming Loans in Loan Loss Allowance & 100.00% & 100.00% \\ \hline Corporate Income Tax Rate & 35.00% & 35.00% \\ \hline Long-Term Capital Gains Tax Rate & 35.00% & 35.00% \\ \hline Minimum Holding Period for Long-term Capital Gains & 0 & 0 \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|} \hline & A & B & C & D \\ \hline 2 & & Market Average Balance Sheet & Q.0 & Q1 \\ \hline 3 & & ASSETS & & \\ \hline 4 & & Required Reserves & $19,699.06 & $19,179.82 \\ \hline 5 & & Excess Reserves & $0.00 & $0.00 \\ \hline 6 & & Federal Funds Sold & $0.00 & $0.00 \\ \hline 7 & & Federal Funds (Rate) & 4.23% & 4.23% \\ \hline 8 & & Fixed-rate Corporate Loans & $186,385.17 & $189,466.49 \\ \hline 9 & & Fixed-rate Corporate Loans (Rate) & 9.30% & 9.30% \\ \hline 10 & & Floating-rate Corporate Loans, maturing start of: & & \\ \hline 11 & & T+1 & $121,945.01 & $129,005.88 \\ \hline 12 & & T+1 (rate) & 4.00% & 4.00% \\ \hline 13 & & T+2 & $129,005.88 & $126,132.84 \\ \hline 14 & & T+2 (rate) & 4.00% & 4.00% \\ \hline 15 & & Consumer Loans, maturing start of: & & \\ \hline 16 & & T+1 & $55,248.11 & $55,915.17 \\ \hline 17 & & T+1 (rate) & 11.00% & 11.00% \\ \hline 18 & & T+2 & $55,915.17 & $49,567.59 \\ \hline 19 & & T+2 (rate) & 11.00% & 11.00% \\ \hline 20 & & T+3 & $49,567.59 & $55,671.60 \\ \hline 21 & & T+3 (rate) & 11.00% & 11.00% \\ \hline 22 & & T+4 & $55,671.60 & $57,719.36 \\ \hline 23 & & T+4 (rate) & 11.00% & 11.00% \\ \hline 24 & & Retail Mortgage Loans, maturing start of: & & \\ \hline 25 & & T+1 & $28,587.07 & $26,809.53 \\ \hline 26 & & T+1 (rate) & 9.00% & 9.00% \\ \hline 27 & & T+2 & $26,809.53 & $28,051.55 \\ \hline 28 & & T+2 (rate) & 9.00% & 9.00% \\ \hline 29 & & T+3 & $28,051.55 & $28,887.73 \\ \hline 30 & & T+3 (rate) & 9.00% & 9.00% \\ \hline 31 & & T+4 & $28,887.73 & $21,510.51 \\ \hline 32 & & T+4 (rate) & 9.00% & 9.00% \\ \hline 33 & & T+5 & $21,510.51 & $26,171.02 \\ \hline 34 & & T+5 (rate) & 9.00% & 9.00% \\ \hline 35 & & T+6 & $26,171.02 & $29,772.73 \\ \hline 36 & & T+6 (rate) & 9.00% & 9.00% \\ \hline 37 & & T+7 & $29,772.73 & $26,235.46 \\ \hline 38 & & T+7 (rate) & 9.00% & 9.00% \\ \hline 39 & & T+8 & $26,235.46 & $27,689.93 \\ \hline 40 & & T+8 (rate) & 9.00% & 9.00% \\ \hline 41 & & Government Bonds, maturing start of: & & \\ \hline 42 & & T+1 & $15,000.00 & $15,000.00 \\ \hline 43 & & T+2 & $15,000.00 & $15,000.00 \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|} \hline 44 & T+3 & $15,000.00 & $15,000.00 \\ \hline 45 & T+4 & $15,000.00 & $15,000.00 \\ \hline 46 & T+5 & $15,000.00 & $15,000.00 \\ \hline 47 & T+6 & $15,000.00 & $15,000.00 \\ \hline 48 & T+7 & $15,000.00 & $15,000.00 \\ \hline 49 & T+8 & $15,000.00 & $15,000.00 \\ \hline 50 & Fixed Assets & $14,739.00 & $14,370.53 \\ \hline 51 & Loan Loss Allowance & $3,731.62 & $3,987.85 \\ \hline 52 & TOTAL ASSETS & $1,020,470.58 & $1,028,169.89 \\ \hline 53 & LIABILITIES & & \\ \hline 54 & Federal Funds Purchased & $25,000.00 & $50,000.00 \\ \hline 55 & Federal Funds Purchased (rate) & 4.23% & 4.23% \\ \hline 56 & Demand Deposits & & \\ \hline 57 & Retail & $97,796.85 & $93,367.57 \\ \hline 58 & Retail (rate) & 0.00% & 0.00% \\ \hline 59 & Corporate & $99,193.71 & $98,430.67 \\ \hline 60 & Corporate (rate) & 0.00% & 0.00% \\ \hline 61 & Negotiable CDs, maturing start of: & & \\ \hline 62 & T+1 & $33,000.00 & $33,000.00 \\ \hline 63 & T+1 (rate) & 5.23% & 5.23% \\ \hline 64 & T+2 & $33,000.00 & $33,000.00 \\ \hline 65 & T+2 (rate) & 5.23% & 5.23% \\ \hline 66 & T+3 & $33,000.00 & $33,000.00 \\ \hline 67 & T+3 (rate) & 5.23% & 5.23% \\ \hline 68 & T+4 & $33,000.00 & $50,000.00 \\ \hline 69 & T+4 (rate) & 5.23% & 5.23% \\ \hline 70 & Savings Deposits & $121,504.77 & $121,326.34 \\ \hline 71 & Savings Deposits (rate) & 5.00% & 5.00% \\ \hline 72 & Retail CDs, maturing start of: & & \\ \hline 73 & T+1 & $100,195.26 & $102,359.66 \\ \hline 74 & T+1 (rate) & 6.00% & 6.00% \\ \hline 75 & T+2 & $102,359.66 & $101,445.79 \\ \hline 76 & T+2 (rate) & 6.00% & 6.00% \\ \hline 77 & Long-term Time Deposits, maturing start of: & & \\ \hline 78 & T+1 & $23,133.43 & $22,296.18 \\ \hline 79 & T+1 (rate) & 7.50% & 7.50% \\ \hline 80 & T+2 & $22,296.18 & $20,762.15 \\ \hline 81 & T+2 (rate) & 7.50% & 7.50% \\ \hline 82 & T+3 & $20,762.15 & $21,201.33 \\ \hline 83 & T+3 (rate) & 7.50% & 7.50% \\ \hline 84 & T+4 & $21,201.33 & $21,324.05 \\ \hline 85 & T+4 (rate) & 7.50% & 7.50% \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|} \hline & A & B & C & D \\ \hline 78 & & T+1 & $23,133.43 & $22,296.18 \\ \hline 79 & & T+1 (rate) & 7.50% & 7.50% \\ \hline 80 & & T+2 & $22,296.18 & $20,762.15 \\ \hline 81 & & T+2 (rate) & 7.50% & 7.50% \\ \hline 82 & & T+3 & $20,762.15 & $21,201.33 \\ \hline 83 & & T+3 (rate) & 7.50% & 7.50% \\ \hline 84 & & T+4 & $21,201.33 & $21,324.05 \\ \hline 85 & & T+4 (rate) & 7.50% & 7.50% \\ \hline 86 & & T+5 & $21,324.05 & $21,457.20 \\ \hline 87 & & T+5 (rate) & 7.50% & 7.50% \\ \hline 88 & & T+6 & $21,457.20 & $21,802.59 \\ \hline 89 & & T+6 (rate) & 7.50% & 7.50% \\ \hline 90 & & T+7 & $21,802.59 & $22,419.27 \\ \hline 91 & & T+7 (rate) & 7.50% & 7.50% \\ \hline 92 & & T+8 & $22,419.27 & $22,490.49 \\ \hline 93 & & T+8 (rate) & 7.50% & 7.50% \\ \hline 94 & & Discount Window Advances & $76,754.41 & $44,967.87 \\ \hline 95 & & Discount Window Advances (rate) & 9.23% & 9.23% \\ \hline 96 & & EQUITY CAPITAL & & \\ \hline 97 & & Net Worth and Retained Earnings & $91,269.72 & $93,518.73 \\ \hline 98 & & TOTAL LIABILITIES AND NET WORTH & $1,020,470.58 & $1,028,169.89 \\ \hline \multicolumn{5}{|l|}{99} \\ \hline 100 & Bank & Regional Interest Rate Report & Q0 & Q1 \\ \hline 101 & Bank 1 & Fixed-rate Corporate Loans & 9.30% & 9.30% \\ \hline 102 & Bank 1 & Floating-rate Corporate Loans & 4.00% & 4.00% \\ \hline 103 & Bank 1 & Consumer Loans & 11.00% & 11.00% \\ \hline 104 & Bank 1 & Mortgage Loans & 9.00% & 9.00% \\ \hline 105 & Bank 1 & Retail Demand Deposits & 0.00% & 0.00% \\ \hline 106 & Bank 1 & Corporate Demand Deposits & 0.00% & 0.00% \\ \hline 107 & Bank 1 & Savings Deposits & 5.00% & 5.00% \\ \hline 108 & Bank 1 & Retail CDs & 6.00% & 6.00% \\ \hline 109 & Bank 1 & Long-term Time Deposits & 7.50% & 7.50% \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|} \hline A & B & C & D \\ \hline 41 & CURRENT EXPENSES & & \\ \hline 42 & Interest Expense & & \\ \hline 43 & Federal Funds Purchased & $264.38 & $528.75 \\ \hline 44 & Retail Demand Deposits & $0.00 & $0.00 \\ \hline 45 & Corporate Demand Deposits & $0.00 & $0.00 \\ \hline 46 & Negotiable CDs & $1,725.90 & $1,948.18 \\ \hline 47 & Savings Deposits & $1,518.81 & $1,516.58 \\ \hline 48 & Long-term Time Deposits & $3,269.93 & $3,257.87 \\ \hline 49 & Retail CDs & $3,038.32 & $3,057.08 \\ \hline 50 & Discount Window Advances & $1,771.11 & $1,037.63 \\ \hline 51 & Provision for Loan Losses & $1,080.49 & $1,065.14 \\ \hline 52 & Advertising & & \\ \hline 53 & Consumer Loans & $130.00 & $130.00 \\ \hline 54 & Mortgage Loans & $60.00 & $60.00 \\ \hline 55 & Retail Demand Deposits & $380.00 & $380.00 \\ \hline 56 & Corporate Demand Deposits & $610.00 & $610.00 \\ \hline 57 & Retail CDs & $250.00 & $250.00 \\ \hline 58 & Savings Deposits & $290.00 & $290.00 \\ \hline 59 & Long-term Time Deposits & $50.00 & $50.00 \\ \hline 60 & Other Non-interest Operating Costs & & \\ \hline 61 & FDIC Insurance Premium & $579.21 & $587.78 \\ \hline 62 & Federal Funds & $27.50 & $55.00 \\ \hline 63 & Fixed-rate Corporate Loans & $465.96 & $489.07 \\ \hline 64 & Floating-rate Corporate Loans & $656.73 & $658.79 \\ \hline 65 & Consumer Loans & $819.36 & $835.78 \\ \hline 66 & Mortgage Loans & $671.24 & $676.27 \\ \hline 67 & Government Bonds & $30.00 & $30.00 \\ \hline 68 & Retail Demand Deposits & $522.64 & $466.84 \\ \hline 69 & Corporate Demand Deposits & $310.69 & $295.29 \\ \hline 70 & DD Costs Offset by Excess Reserves & $0.00 & $0.00 \\ \hline 71 & Negotiable CDs & $36.30 & $55.00 \\ \hline 72 & Savings Deposits & $321.28 & $303.32 \\ \hline 73 & Retail CDs & $101.28 & $108.16 \\ \hline 74 & Long-term Time Deposits & $87.20 & $86.88 \\ \hline 75 & Premises and Fixed Assets & $0.00 & $743.48 \\ \hline 76 & Other Transaction Costs & $120.08 & $11.30 \\ \hline 77 & Restructuring Charges & $0.00 & $0.00 \\ \hline 78 & TOTAL EXPENSES & $19,188.42 & $19,584.18 \\ \hline 79 & NET CURRENT OPERATING EARNINGS & $3,681.16 & $3,460.01 \\ \hline 80 & Taxes on Current Earnings & $1,288.40 & $1,211.00 \\ \hline 81 & Realized (Long-term) Capital Gains & $0.00 & $0.00 \\ \hline 82 & Taxes Applicable to Capital Gains & $0.00 & $0.00 \\ \hline \end{tabular} Summary Economy Market 1 Bank 1 Ready x2 Accessibility: Investigate \begin{tabular}{|c|c|c|c|c|} \hline A & B & & C & D \\ \hline 275 & \multicolumn{2}{|l|}{ Loan Performance Report } & Q0 & Q1 \\ \hline 276 & \multicolumn{2}{|l|}{ Fixed-Rate Corporate Loans } & & \\ \hline 277 & \multicolumn{2}{|l|}{ Matured Last Quarter ($1,000s)} & $188,092.02 & $186,385.17 \\ \hline 278 & \multicolumn{2}{|l|}{ Defaulted ($1,000s)} & $156.40 & $197.01 \\ \hline 279 & \multicolumn{2}{|l|}{ Percent Defaulted } & 0.08% & 0.11% \\ \hline 280 & \multicolumn{2}{|l|}{ Percent Nonperforming } & 0.15% & 0.18% \\ \hline 281 & \multicolumn{2}{|l|}{ Nonperforming ($1,000s)} & $270.56 & $341.37 \\ \hline 282 & \multicolumn{4}{|l|}{ Floating-Rate Corporate Loans } \\ \hline 283 & \multicolumn{2}{|l|}{ Matured Last Quarter ($1,000s)} & $123,134.93 & $121,945.01 \\ \hline 284 & \multicolumn{2}{|l|}{ Defaulted ($1,000s)} & $257.07 & $208.69 \\ \hline 285 & \multicolumn{2}{|l|}{ Percent Defaulted } & 0.21% & 0.17% \\ \hline 286 & \multicolumn{2}{|l|}{ Percent Nonperforming } & 0.34% & 0.34% \\ \hline 287 & \multicolumn{2}{|l|}{ Nonperforming ($1,000s)} & $848.62 & $872.18 \\ \hline 288 & \multicolumn{4}{|l|}{ Consumer Loans } \\ \hline 289 & \multicolumn{2}{|l|}{ Matured Last Quarter ($1,000s)} & $48,385.91 & $55,248.11 \\ \hline 290 & \multicolumn{2}{|l|}{ Defaulted ($1,000s)} & $291.88 & $385.24 \\ \hline 291 & \multicolumn{2}{|l|}{ Percent Defaulted } & 0.60% & 0.70% \\ \hline 292 & \multicolumn{2}{|l|}{ Percent Nonperforming } & 1.10% & 1.15% \\ \hline 293 & \multicolumn{2}{|l|}{ Nonperforming ($1,000s)} & $2,375.32 & $2,526.03 \\ \hline 294 & \multicolumn{4}{|l|}{ Mortgage Loans } \\ \hline 295 & \multicolumn{2}{|l|}{ Matured Last Quarter ($1,000s)} & $26,206.97 & $28,587.07 \\ \hline 296 & \multicolumn{2}{|l|}{ Defaulted ($1,000s)} & $16.58 & $17.97 \\ \hline 297 & \multicolumn{2}{|l|}{ Percent Defaulted } & 0.06% & 0.06% \\ \hline 298 & \multicolumn{2}{|l|}{ Percent Nonperforming } & 0.11% & 0.12% \\ \hline 299 & \multicolumn{2}{|l|}{ Nonperforming (\$1,000s) } & $237.12 & $248.28 \\ \hline 300 & TOTAL & & & \\ \hline 301 & TOTAL Matured Last Quarter ($1,000s) & & $385,819.83 & $392,165.36 \\ \hline 302 & TOTAL Defaulted ($1,000s) & & $721.93 & $808.90 \\ \hline 303 & TOTAL Nonperforming ($1,000s) & & $3,731.62 & $3,987.85 \\ \hline 304 & & & & \\ \hline 305 & Decisions & & Q0 & Q1 \\ \hline 306 & Quantities & & & \\ \hline 307 & Initial Reserve Allocation & & $0.00 & $25,000.00 \\ \hline 308 & Federal Funds Sold & & $0.00 & $0.00 \\ \hline 309 & Federal Funds Purchased & & $25,000.00 & $50,000.00 \\ \hline 310 & 90-day Negotiable CDs to Issue & & $0.00 & $0.00 \\ \hline 311 & 180-day Negotiable CDs to Issue & & $0.00 & $0.00 \\ \hline 312 & 360-day Negotiable CDs to Issue & & $33,000.00 & $50,000.00 \\ \hline 313 & New 8-quarter Bonds to Purchase & & $15,000.00 & $15,000.00 \\ \hline 314 & Bonds to Sell, due start of T+2 & & $0.00 & $0.00 \\ \hline 315 & Bonds to Sell, due start of T+3 & & $0.00 & $0.00 \\ \hline 316 & Bondsto-Seli.due start of T+4 & & 50.00 & $0.00 \\ \hline 4 & Summary & Mar & Bank 1 & + \\ \hline \end{tabular} Ready ~x Accessibility: Investigate