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Question 6.P.12: Using this information for Dragon International Bank and Tru...

Using this information for Dragon International Bank and Trust Company (all figures in millions), calculate the bank’s net interest margin, noninterest margin, and ROA.

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Interest income =$70 Noninterest expense =8
Interest expense =56 Noninterest income =5
Provision for loan losses =3 Extraordinary net gains =1
Security gains (or losses) =2 Total Assets =1000

 

a. Net Interest Margin  = (Interest Income – Interest Expenses)/Total Assets

 

=\frac{\$ 70-\$ 56}{\$ 1,000}=\frac{\$ 14}{\$ 1,000}=0.014 \text { or } 1.40 \%

 

b.  Noninterest Margin = (Noninterest Income – Noninterest Expenses)/Total Assets

 

=\frac{\$ 5-\$ 8}{\$ 1,000}=\frac{-\$ 3}{\$ 1,000}=-0.0030 \text { or }-.3 \%

 

c.  ROA = Net Income  Total Assets  = ([($70+$5+$2+$1) – ($56+$8+$3)])/$1,000 = $11/$1,000 = 0.011 or 1.40%

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