FIN 4243: Commercial Bank Management Homework Assignment 1 1. Use the information listed below for Carter State Bank and calculate the bank's ROE and its three component ratios (Net profit margin, Asset utilization and equity multiplier.) (3 points) Net income $17 million Total assets S1,546 million Total revenue S294 million Total equity capital $148 million 2. A bank which starts with ALLL (used to be abbreviated as ALL) of $11.25 million at the beginning of the year. The charge for provision for loan losses for the year was $4.10 million. The bank charged off worthless loans of $4.76 million during the year and recovered S6,5 million on loans previously charged off. What is the end-of-the year balance for ALLL? (Show work, please.) (2 points) 3. A bank currently owns a municipal bond paying a tax-exempt rate of 2.9%. The banks camed S5.1 million tax-exempt income from this bond. If the banks marginal tax rate is 32%, what is the taxable equivalent income in dollars? What is the tax benefit? (2 points) $27 4. Incomplete financial statements of M Street Bank are given below. S In millions Balance Sheet Income Statement Cash $60 Interest Income Securities Investments $145 Interest Expenses Net Loans $921|Net interest income Net Premises and Equip Total Assets ........ Non-interest Income Deposits $907 Non-interest Expenses Non-deposit Borrowings $121 Provision for Loan Losses Equity Capital Pre Tax Net Operating Income Total Liabilities and Equity Securities Gains (Losses) Taxes Earning assets Net Income Interest bearing liabilities 5861 a. Please complete the missing items in the balance sheet and the income statement. (2 points) b. Calculate the following ratios: ROE, ROA, Net interest margin, Net profit margin, Earnings spread, Equity multiplier, and Asset Utilization. You may assume that the balance sheet numbers are averages for two periods. (5 points) c. Write the extended Du Pont equation for the bank (actual numbers, not the formulas). (1 point)