(CVBF). BAC is one of the largest bank holding companies in the world, while CVBF is a considerably smaller, regional financial institution. I deliberately chose the companies of such different sizes to demonstrate the differences in the balance sheet composition, sources of revenues, involvement in the off-balance sheet activities etc. 1. Go to the website of the National Information Center (http://www.ffiec.gov/nicpubweb/nicweb/nichome.aspx). Then go to "Institution Search" and enter "1073757" for institution's RSSD ID. Click on "Search". Choose "Bank of America Corporation" (ID 1073757). Then choose "Consolidated Financial Statements for BHCS (FR Y- 9C)". Download and save the PDF file for 2023-12-31. Then repeat the same procedure to download reports for 2022-12-31, 2021-12-31, 2020-12-31, and 2019-12-31. Save all the files on your computer. Then repeat the above procedure for the "CVB Financial" (ID 1029222). Now you have 5-year financial statements for two companies. Alternatively, instead of using PDF files, you can download CSV (spreadsheet) files. The CSV files are easier to work with in terms of extracting the relevant data. However, the CSV files are not well organized. They just list the variables in no particular order. One option is to use PDF files to identify the variables of interest, and then find those variables in the CSV file, using its unique identifier. For example, you can use the PDF file to find the total consolidated assets of a BHC, shown in the BHC's Balance Sheet. You will notice that the total consolidated assets have the identifier, BHCK2170. Now you can use that identifier to find the value of the total consolidated assets in the CSV file. 2. Compare the performance of BAC and CVBF over the last 5 years. In particular, do the following. a. Create spreadsheet with the Balance Sheet (Schedule HC) and Income Statement (Schedule HI) data over 5 years for BAC and CVBF. It is a tedious exercise, but it will significantly simplify your further analysis. b. Write one paragraph comparing the asset composition of BAC to that of CVBF. To do it, calculate the percentages of certain broad groups of assets to total assets. For example, net loans-to-total assets, securities-to-total assets etc. Comment on the behavior of those percentages over time, and compare between two banks. Note that a bank may grow rapidly due to mergers and acquisitions. C. Using Schedule HC-N, calculate the ratio of the non-performing loans to total loans for each year for each company. Comment on your results. Hint: the best measure of the non- performing loans is the sum of the loans past due 90 days or more (Column B, bhck1407) and nonaccrual loans (Column C, bhck1403). Do the same analysis for Net Charge Off Ratio, defined as Net Charge Offs/Total Loans. Note that Net Charge Off = Charge Off - Recovery. Use Schedule HI-B to find information about total charge-offs (bhck4635) and recoveries (bhck4605). e. Perform the comparative profitability analysis of BAC and CVBF. To do it, create the following table for each institution: 12-31-23 12-31-22 12-31-21 12-31-20 12-31-19 Profitability Ratios Return on Equity Return on Assets Net Interest Margin Net Non-Interest Margin Net Operating Margin Breakdown of ROE Net Profit Margin Asset Utilization Ration Equity Multiplier Breakdown of ROA Net Interest Margin Noninterest Margin Special Transactions Special Transactions Affecting Net Income Analyze the information in the tables. 3. Conduct interest rate sensitivity analysis for BAC and CVBF over the last 5 years. In particular, using the data in Schedule HC-H create the following table for each institution: 1-year interest sensitive assets 1-year interest sensitive liabilities (including variable rate preferred stock) Interest sensitive GAP 12-31-23 12-31-22 12-31-21 12-31-20 12-31-19 a. Relative interest sensitive GAP Asset/Liability Sensitive? On the basis of the tables you created, discuss interest rate risk exposure of BAC and CVBF over the last 5 years. b. Working with the data as of 12-31-2023, what will be the impact of a 1 percentage point increase/decrease in interest rates on the net interest income of BAC if such an C. increase/decrease occurs within the next year? What will be the effect on the CVBF's interest income? Given your answers in b, what hedging strategies would you suggest to the management of BAC and CVBF to protect their net interest margins? In particular, discuss possible financial instruments that might be used to hedge current interest rate risks of two companies and what position you might take (long or short) for each company given each company's risk exposure. No calculations are required here. d. Assume that CVBF has the following duration structure of assets and liabilities as of 12-31- 2023. d. Assume that CVBF has the following duration structure of assets and liabilities as of 12-31- 2023: Assets Duration Liabilities (years) Cash and balances due from 0 Deposits Duration (years) 1 depository institutions Securities 3 Fed funds and REPOS 0 Federal funds sold and reverse REPOS 0 Trading liabilities 0.4 Loans and leases net of ALL 5 Other borrowed money 0.3 Trading assets 0.5 Subordinated notes and debentures 3 Fixed assets 0 All other liabilities 0 All other assets 0 Combine the above information with CVBF's balance sheet data as of 12-31-2023, and calculate the projected change in CVBF's net worth if average interest rates on assets and liabilities rise/fall by 50 basis points (0.5 percentage points). Assume that current average interest rate on assets is 6%, and current interest rate on liabilities is 5%.