Exam 3: Evaluating Bank Performance

Banks show gains or losses on securities as an extraordinary item on their income statement.

Budget or profit plans are in-depth statements that are intended to bring the bank's objectives down to the department level.

Nonperforming assets represent a leading indicator of credit quality while charge-offs represent a lagging indicator.

A high equity multiplier can increase ROE and the growth rate of the bank as long as ROA is:

Which of the following groups have an interest in evaluating bank performance?

EVA is a financial management technique that enables banks to select loans that maximize shareholder wealth.

Net charge-offs are gross charge-offs less the provision for loan losses.

Under RAROC, if the required loan rate is calculated to be 10%, the loan must earn at least this rate in order to earn the target:

To obtain net loans from gross loans the following items must be subtracted:

Loans are the least liquid of bank financial assets, and the major source of risk, but the highest yielding.

Nonperforming assets are loans on which interest income is not being accrued, restructured loans on which interest rates or terms of repayment have been materially revised, and real properties acquired through foreclosure.

The proportion of assets, deposits, and loans held by a bank in its business region relative to other banks is called:

If a bank has gross charge-offs of $25 for the current year, recoveries of $40, and provision for loan losses of $30, how much will the reserve for loan losses change?

Banks implement new technologies for all of the following reasons EXCEPT:

RAROC and EVA can reduce agency costs.

The return on equity is the product of:

The _____ of increasing technology must be weighed against the potential benefits of ______.

A weakness of RAROC is:

The dollar gap ratio is calculated by subtracting the amount of interest-rate sensitive liabilities from the amount of interest-rate sensitive assets and expressing the difference as a percent of total assets.

The volatile liability dependency ratio subtracts temporary investments from volatile liabilities and expresses the difference as a fraction of loans.