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EFIN 519 Lecture 02
EFIN 519 Lecture 02
The Financial
Statements of Banks
and Their Principal
Competitors
McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
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Key Topics
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Report of Condition
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C + S + L + MA = D + NDB + EC
C = Cash Assets
D = Deposits
S = Security Holdings
NDB = Non-deposit Borrowings
L = Loans
EC = Equity Capital
MA = Miscellaneous Assets
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Cash Assets
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Investment Securities
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Loan Accounts
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Types of Loans
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Beginning ALL
+ Provision for Loan Loss (Income Statement)
= Adjusted Allowance for Loan Losses
- Actual Charge-Offs
+ Recoveries from Previous Charge-Offs
= Ending Allowance for Loan Losses
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Miscellaneous Assets
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Deposit Accounts
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Nondeposit Borrowings
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Equity Capital
• Preferred Stock
• Common Stock
▫ Common Stock Outstanding
▫ Capital Surplus
▫ Retained Earnings (Undivided Profits)
▫ Contingency Reserve
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Off-Balance-Sheet Items
• Unused Commitments
• Standby Credit Agreements
• Derivative Contracts
▫ Futures Contracts
▫ Options
▫ Swaps
• OBS Transactions Exposure a Firm to
Counterparty Risks
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Report of Income
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Income Statement
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Quick Quiz
• What accounts make up the Report of Income?
• What is the relationship between the provision
for loan losses on a bank’s Report of Income
and the allowance for loan losses on its Report
of Condition?
• Suppose a bank has an allowance for loan losses of
$1.25 million at the beginning of the year, charges
current income for a $250,000 provision for loan
losses, charges off worthless loans of $150,000,
and recovers $50,000 on loans previously charged
off. What will be the balance in the allowance for
loan losses at year-end?
McGraw-Hill/Irwin © 2008 The McGraw-Hill Companies, Inc., All Rights
Bank Management and Financial Services, 7/e Reserved.
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