Exam 14: The Commercial Banking Industry: Structure, Products, and Management

Banks can create money from excess reserves.

Written loan policies help keep a bank safe but are not used to help train new loan officers.

Over the years, the number of U.S. banks has declined while the number of bank branches has actually increased.

Four dominant movements in the structure of U.S. banking in recent years have been: a. The spread of branch banking b. The growth of financial holding companies c. The rise of interstate banking d. The convergence of bank and nonbank firms Explain what has happened in these four areas and why.

There are approximately ____ commercial banking institutions headquartered in the United States.

How do banks destroy money?

Why is money creation and destruction of importance in the pursuit of public policy?

Banks with over $1T in assets are

While commercial lending is growing rapidly, individual homeowners are finding that home equity loans and credit cards are harder to get, due to a lack of competitive pressures.

What is net interest margin? Noninterest margin? Why are they important to banks?

What new sources and uses of funds have been developed in the banking industry in recent years?

Most commercial banks in the U.S. are charted by the federal government rather than by the states.

The NAFTA Agreement provides banks in North America with national treatment which m

Transaction accounts include negotiable orders of withdrawal and automatic transfer services.

What changes are underway in bank technology and why?

Recent regulatory changes in the banking community have made banking more stable.

What benefits do standby credit letters provide for banks and their customers?

The failure rate in the U.S. banking industry is between one and two percent of the industry population over most of the industry's history.

Between 1984 and 2005 the US banking industry's assets accounted for by the smallest banks, each with less than $1 billion in assets, fell from 23% to 12%.

*Expressed on a taxable-equivalent basis. Income taxes are adjusted accordingly. Net Operating Income (\ 504,000-\ 321,000)= \ 183,000 Less: Applicable Income Taxes -50,000 Net Income after Taxes and Before Extraordinary \ 133,000 Charges Less: Extraordinary Items (including securities gains and losses) 0 Net Income After Taxes \ 133,000 The Bank's Operating Expenses include Salaries and Employee Benefits \ 80,000 Interest on Deposits 170,000 Interest on Nondeposit Borrowings 30,000 Occupancy Costs 11,000 Provisions for Loan Losses 22,000 Misc. Expenses 8,000 Total Operating Expenses \ 321,000 The Bank's Operating Income is: Interest on Loans \ 320,000 Interest from U.S. Treasury Securities 75,000 Interest from Municipal Securities* 86,000 Service Charges on Deposits 10,000 Misc. Operating Revenues 13,000 Total Operating Income \ 504,000 Given the following information on the revenues and expenses of First National Bank, determine the bank's net income after taxes for the year just concluded.