The following information is for Blue Sky National Bank:

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Accepted Answer

Interest income	$2,200
Interest expense	$1,400
Total assets	$45,000
Securities losses or gains	$21
Earning assets	$40,000
Total liabilities	$38,000
Taxes paid	$16
Shares of Common Stock outstanding	5,000
Noninterest income	$800
Noninterest expense	$900
Provision for loan losses	$100

Please calculate:
ROE
ROA
Net interest margin
Earnings per share
Net noninterest margin
Net operating margin

[latex]\operatorname{ROE}=\frac{\$ 605}{\$ 45,000-\$ 38,000} \quad ROA =\frac{\$ 605}{\$ 45,000}[/latex]

= 0.0864or 8.64 percent = 0. 0134 or 1.34 percent

[latex] ext { Net Interest Margin }=\frac{\$ 2,200-\$ 1400}{\$ 40,000}=\frac{\$ 800}{\$ 40,000}=0.02 ext { or } 2 ext { percent }[/latex]

[latex] ext { Earnings Per Share }=\frac{\$ 605}{5,000}=\$ .121 ext { per share }[/latex]

[latex] ext { Net Noninterest Margin }=\frac{\$ 800-\$ 900}{\$ 40,000}=\frac{-\$ 100}{\$ 40,000}=-0.0025 ext { or }-0.25 ext { percent }[/latex]

[latex] ext { Net Operating Margin }=\frac{(\$ 2,200+\$ 800)-(\$ 1,400+\$ 900+\$ 100)}{\$ 45,000}=\frac{\$ 600}{\$ 45,000}=0.0133 ext { or } 1.33 ext { percent }[/latex]

Alternative Scenario a:

Suppose interest income, interest expenses, noninterest income, and noninterest expenses each increase by 5 percent, with all other revenue and expense items shown in the preceding table remain unchanged. What will happen to Blue Sky’s ROE, ROA, and earnings per share?.

Interest income	$2,310
Interest expense	$1,470
Total assets	$45,000
Securities losses or gains	$21
Earning assets	$40,000
Total liabilities	$38,000
Taxes paid	$16
Shares of Common Stock outstanding	5,000
Noninterest income	$840
Noninterest expense	$945
Provision for loan losses	$100

[latex]\operatorname{ROE}=\frac{\$ 640}{\$ 45,000-\$ 38,000} \quad ROA \quad=\frac{\$ 640}{\$ 45,000}[/latex]

= 0.0914 or 9.14 percent = 0.0142 or 1.42 percent

[latex] ext { Net Interest Margin }=\frac{\$ 2310-\$ 1470}{\$ 40,000}=\frac{\$ 840}{\$ 40,000}=0.021 ext { or } 2.10 ext { percent }[/latex]

[latex] ext { Earnings Per Share }=\frac{\$ 640}{5.000}=\$ .128 ext { per share }[/latex]

[latex] ext { Net Noninterest Margin }=\frac{\$ 760-\$ 855}{\$ 40,000}=\frac{-\$ 95}{\$ 40,000}=-0.00238 ext { or }-.24 ext { percent }[/latex]

[latex] ext { Net Operating Margin }=\frac{(\$ 2090+\$ 760)-(\$ 1,330+\$ 855+\$ 100)}{\$ 45,000}=\frac{\$ 565}{\$ 45,000}=0.0126 ext { or } 1.26 ext { percent }[/latex]

Question 6.P.5: The following information is for Blue Sky National Bank:

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