The financial statements for MHM Bank (MHM) are shown below: a. Calculate MHM’s
ID: 2652911 • Letter: T
Question
The financial statements for MHM Bank (MHM) are shown below:
a. Calculate MHM’s total operating income (3 points).
b. Calculate MHM’s asset utilization ratio (3 points).
c. Calculate MHM’s ROA (3 points).
d. Calculate the dollar value of MHM’s earning assets (3 points).
e. Calculate the dollar value of MHM’s interest-bearing liabilities (3 points).
f. Calculate MHM’s spread (3 points).
g. Calculate MHM’s net interest margin (3 points).
h. Calculate MHM’s interest expense ratio (3 points).
Please show all work adn explantions, thank you (All information the book gave me)
Balance Sheet MHM Bank
Assets
Liabilities and Equity
Cash and due from banks
$
8,200
Demand deposits
$
35,600
Demand deposits at other FIs
9,100
Small time deposits
32,900
Investments
9,600
Jumbo CDs
12,000
Federal funds sold
9,400
Federal funds purchased
3,300
Loans (less reserve for loan losses of 10,400)
74,800
Other liabilities
16,200
Premises
8,900
Equity
20,000
Total assets
$
120,000
Total liabilities/equity
$
120,000
Income Items for MHM Bank
Interest income
$ 9,380
Interest expense
3,856
Provision for loan losses
7,800
Noninterest income
6,044
Noninterest expense
4,300
Taxes (credit)
- 132
Balance Sheet MHM Bank
Assets
Liabilities and Equity
Cash and due from banks
$
8,200
Demand deposits
$
35,600
Demand deposits at other FIs
9,100
Small time deposits
32,900
Investments
9,600
Jumbo CDs
12,000
Federal funds sold
9,400
Federal funds purchased
3,300
Loans (less reserve for loan losses of 10,400)
74,800
Other liabilities
16,200
Premises
8,900
Equity
20,000
Total assets
$
120,000
Total liabilities/equity
$
120,000
Explanation / Answer
a. MHM total operating income= Interest income- interest expenses
= 9380- 3856= $5524
b.MHM Assets utilization ratio=Revenue/total assets=((9380+6044)/120000)*100=12.85 %
c. MHM ROA= Annual net income/ Average total assts=(9380+6044-3856-4300-132)/120000=5.94%
d.Dollar value of MHM earning assets= Demand deposits at other FIs+Investments + loans+federal fund sold
=9100+9600+74800+9400= $102900
e.Interest bearing liabilities= Demand deposits+small time deposits+ jumbo cds+federal funds purchased
=35600+32900+12000+3300= $83800
f. MHM spread= Interest earned- interest paid=9380- 3856= $5524
g. Net interest margin= Net interest income/interest earning assets
= (5524/102900)*100=5.37%
h. interest expense ratio= operating income/interest expense
=5524/3856=1.43
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