Exam 20: Bank Performance

Small banks tend to make more loans to small local businesses, and the rates on these loans are typically lower than the rates that larger banks charge on the loans they provide to large businesses.

If a bank has long-term fixed-rate assets and short-term liabilities, and interest rates increase over time, its net interest margin should

Net income measured as a percentage of assets is

The loan loss provision should increase during periods when loan losses are more likely, such as during a recessionary period.

The accounting process used by banks to determine their earnings is still based on subjective decisions, so the earnings of a bank are partially influenced by the accounting decisions regarding loan losses.

Which of the following factors affecting a bank's gross interest income is NOT influenced by the bank's policy decisions?

A bank's return on assets (ROA)could be lower than desired because of all of the following EXCEPT

Any individual bank's ROA depends on the bank's policy decisions, but is not affected by uncontrollable factors relating to the economy and government regulations.

A bank's ROA ____ account for taxes on earnings. A bank's ROE ____ account for taxes on earnings.

Even if other external forces (such as interest rates)are unchanged, a commercial bank's expected cash flows can change in response to a change in its management skills.

Interest income generated from all a bank's assets is called

Return on assets (ROA)will usually reveal when a bank's performance is not up to par, but it does not indicate the reason for poor performance.

The loan loss provision as a percentage of assets should increase during periods of high economic growth.

Which of the following banks would likely have the highest return on equity?

Gross interest expenses of banks are normally higher in periods when market interest rates are higher.

A bank's net interest margin includes

Bank T generally obtains a high percentage of its funds from negotiable certificates of deposit (NCDs). Bank V obtains most of its funds from retail CDs. Bank Z obtains its funds from checking accounts. The bank that will likely incur the highest interest expense is ____.

During the credit crisis, the level of ____ was much higher than in other periods.

The value of a commercial bank can be modeled as the present value of its future cash flows.

Banks with relatively ____ ROAs are possibly incurring ____ noninterest expenses .