Exam 20: Bank Performance

When only equity counts as capital, the higher the capital ratio, the

A bank's net interest margin represents the proportion of its investments that are financed with borrowed funds.

Banks A and B have the same net income. Bank A has a higher capital ratio and more assets than B. Bank A's return on assets is ____ than Bank B's. Bank A's return on equity is ____ than Bank B's.

Changes in ____ are a factor affecting the value of a commercial bank over which the bank has some control.

Some banks that are experiencing serious financial problems may prefer to overstate their earnings in order to allow more time to correct their operations before the regulators force them to close.

A bank's ROE ____ account for its financial leverage. A bank's ROA ____ account for its financial leverage.

Interest paid on deposits and borrowed funds is called

Fees charged by a bank on various services allow the bank to generate

When interest rates fall, the rates that a bank pays on deposits typically decline less than the interest rates that the bank earns on its loans and investments.

Banks G and H are the same size and have similar operations. Bank G holds the minimum level of capital, and Bank H holds a higher level of capital. Bank G's return on equity is probably ____ volatile than that of Bank H. Bank G's risk premium is probably ____ than that of Bank H.

The sum of net interest income, noninterest income, and securities gains, minus the provision for loan losses and noninterest expenses equals

If banks continue to offer new services (such as insurance or securities services), their noninterest income will decrease over time.

When only equity counts as capital, the leverage measure is

____ result(s)from a bank's sale of securities.

If a bank increases its provisions for loan losses, its interest income is ____, and its noninterest income is ____.

If a bank has short-term deposits and provides long-term fixed-rate loans, and interest rates decline over time, its net interest margin should be

The level of competition is an industry characteristic that will favorably affect cash flows, because a high level of competition may increase a bank's volume of business or increase the prices it can charge for its services.

Banks increase their loan loss reserves in order to boost their reported earnings.

Noninterest income is usually higher for small banks than for money center and large banks because small banks can charge higher rates on loans to small local businesses.

A bank with ____ management may account for ____ loan losses, which _____ reported earnings now.