Smallville Bank has the following balance sheet, rates earned on its assets, and
ID: 2655859 • Letter: S
Question
Smallville Bank has the following balance sheet, rates earned on its assets, and rates paid on its liabilities.
Balance Sheet (in thousands)
Assets
Rate Earned (%)
Cash and due from banks
$?6,000
?0
Investment securities
22,000
?8
Repurchase agreements
12,000
?6
Loans less allowance for losses
80,000
10
Fixed assets
10,000
?0
Other earning assets
??4,000
?9
Total assets
$134,000
Liabilities and Equity
Rate Paid (%)
Demand deposits
$?9,000
0
NOW accounts
69,000
5
Retail CDs
18,000
7
Subordinated debentures
?14,000
8
Total liabilities
110,000
Common stock
10,000
Paid-in capital surplus
3,000
Retained earnings
?11,000
Total liabilities and equity
$134,000
If the bank earns $120,000 in noninterest income, incurs $80,000 in noninterest expenses, and pays $2,500,000 in taxes, what is its net income? (Please show work)
Assets
Rate Earned (%)
Cash and due from banks
$?6,000
?0
Investment securities
22,000
?8
Repurchase agreements
12,000
?6
Loans less allowance for losses
80,000
10
Fixed assets
10,000
?0
Other earning assets
??4,000
?9
Total assets
$134,000
Liabilities and Equity
Rate Paid (%)
Demand deposits
$?9,000
0
NOW accounts
69,000
5
Retail CDs
18,000
7
Subordinated debentures
?14,000
8
Total liabilities
110,000
Common stock
10,000
Paid-in capital surplus
3,000
Retained earnings
?11,000
Total liabilities and equity
$134,000
Explanation / Answer
Interest Income earned Investment Securities 22000*8% 1760 Repurchase agreements 12000*6% 720 Loans 80000*10% 8000 Other earning assets 4000*9% 360 Total Interest earned 10840 Interest Expense NOW accounts 69000*5% 3450 Retail CDs 18000*7% 1260 Subordinated debentures 14000*8% 1120 Total Interest Expense 5830 Interest Income 10840 Add: Non Interest Income 120000 Total Income 130840 Less : Interest Expense -5830 Non Interest expense -80000 Net Income 45010
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