A bank reports that the total amount of its net loans and leases outstanding is $936 million, its assets total $1,324 million, its equity capital amounts to $110 million, and it holds $1,150 million in deposits, all expressed in book value. The estimated market values of the bank's total assets and

Question

A bank reports that the total amount of its net loans and leases outstanding is $936 million, its assets total $1,324 million, its equity capital amounts to $110 million, and it holds $1,150 million in deposits, all expressed in book value. The estimated market values of the bank's total assets and equity capital are $1,443 million and $130 million, respectively. The bank's stock is currently valued at $60 per share with annual per-share earnings of $2.50. Uninsured deposits amount to $243 million and money - market borrowings total $132 million, while nonperforming loans currently amount to $43 million and the bank just charged off $21 million in loans. Calculate as many of the risk measures as you can from the foregoing data.

Accepted Answer

[latex]\frac{ ext { Net Loans and Leases }}{ ext { Total Assets }}=\frac{\$ 936 ext { mill. }}{\$ 1,324 ext { mill. }}[/latex]

= 0.7069 or 70.69 percent

[latex]\frac{ ext { Uninsured Deposits }}{ ext { Total Deposits }}=\frac{\$ 243 ext { mill. }}{\$ 1,150 ext { mill. }}[/latex]

= 0.2113 or 21.13 percent

[latex]\frac{ ext { Equity Capital }}{ ext { Total Assets }}=\frac{\$ 130 ext { mill. }}{\$ 1,443 ext { mill. }}[/latex]

= 0.0901 or 9.01 percent

[latex]\frac{ ext { Stock Price }}{ ext { Earnings Per Share }}=\frac{\$ 60}{\$ 2.50}[/latex]

= 24 X

[latex]\frac{ ext { Nonperforming Assets }}{ ext { Net Loans and Leases }}=\frac{\$ 43 ext { mill. }}{\$ 936 ext { mill. }}=0.0459 ext { or } 4.59 ext { percent }[/latex]

[latex]\frac{ ext { Charge-offs of loans }}{ ext { Total Loans and Leases }}=\frac{\$ 21}{\$ 936}[/latex]

= 0.0224 or 2.24 percent

[latex]\frac{ ext { Purchased Funds }}{ ext { Total Liabilities }}=\frac{\$ 243 ext { mill. }+\$ 132 ext { mill. }}{\$ 1,324 ext { mill. }-\$ 110 ext { mill. }}[/latex]

= 0.3089 or 30.89 percent

[latex]\frac{ ext { Book Value of Assets }}{ ext { Market Value of Assets }}=\frac{\$ 1324}{\$ 1443}=0.9175 ext { or } 91.75 ext { percent }[/latex]

Question 6.18: A bank reports that the total amount of its net loans and le...

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