Bank Management

Ch.3:Analyzing Bank Performance: Using the UBPR- Questions 1,2,4,7

1). The major categories involved in bank assets include 1-Cash & due from banks, 2-Investment Securities, 3-Loans, and 4-Other Assets. Among these major categories, loans basically generate the greatest amount of income/ revenue which makes up for the largest contribution to total resources. The major categories of bank liabilities include, 1-Demand Deposits, 2- NOW's and ATS from savings, 3-MMDA's, and 4- Savings & Time Deposits. The difference between the two is that assets are what banks own or invest in to generate revenue; whereas bank liabilities are a debt instrument or funding source for a bank.

2). These terms, concepts, and rates are heavily used to compile a bank's Income Statement. The first component is 1-Interest Income (II) which includes interest from loans, deposits held at other institutions, municipal & taxable securities, and investment and trading account securities. 2- Non-Interest Income (OI) consists of deposit service charges, fee income, and trust income. 3-Non-Interest Expense (OE) consists of overhead costs usually covering people, buildings, & equipment. It also covers personnel expenses like salaries and fringe benefits, and occupancy expenses. 4-Net Interest Income- Gross II-Gross IE is the calculation for this component. The resulting figure indicates how well management is controlling interest rate risk. 5- Bank Burden- consists of NonIntExp-NonIntInc. 6-Efficiency Ratio- measures the difference between Non Interest expense and the sum of NetIntInc+NonIntInc.

7). These following terms make up the Return on Equity Model. This model basically analyzes a banks profitability. The ratios compiled in this model are used to assess the performance of a bank. The following terms are explained as followed:

1- ROE: Return on Equity. ROE is