Question 1

At almost all banks noninterest expense is greater than noninterest income; hence,the overhead efficiency ratio is usually greater than 100 percent.

Accepted Answer

A) True 
 B)False

Question 2

Fernando Bank has interest expense of $150 million,earning assets of $1,400 million and a NIM of 5.00 percent. The bank also has interest-bearing liabilities of $1,100 million. Fernando Bank's spread is

Accepted Answer

A) 1.10 percent. 
B) 1.65 percent. 
C) 1.94 percent. 
D) 2.08 percent. 
E) 2.16 percent.

Question 3

Rate-sensitive funding sources at a bank are termed core deposits.

Accepted Answer

A) True 
 B)False

Question 4

Which one of the following is the definition of the NIM?

Accepted Answer

A) (Net interest income - Net noninterest income)/Earning assets 
B) Net interest income/Interest-bearing liabilities 
C) (Interest income - Interest expense)/Earning assets 
D) (Interest income - Interest expense)/Interest-bearing liabilities 
E) (Interest income/Earning assets)- (Interest expense/Interest-bearing liabilities)

Question 5

A wholesale bank is one that focuses its business activities on commercial banking relationships.

Accepted Answer

A) True 
 B)False

Question 6

All but which one of the following is an example of noninterest income or noninterest expense?

Accepted Answer

A) Income from service charges on deposits 
B) Income from trust services 
C) Gains and losses from trading account assets 
D) Earnings on securities held for investment 
E) Salaries and benefits paid to employees

Question 7

The largest source of income at a typical bank is

Accepted Answer

A) interest income on securities held for sale. 
B) interest income on securities held for investment. 
C) interest income on loans and leases. 
D) noninterest income. 
E) dividends or stock.

Question 8

Investment securities plus ____________________ is equal to a bank's earning assets.

Accepted Answer

A) net loans and leases 
B) gross loans and leases 
C) property,plant,and equipment 
D) securities held for trading 
E) purchased accounts

Question 9

Oceanside Bank converts a dollar of equity into 10 cents of net income and has $9.50 in assets per dollar of equity capital. Oceanside also has a profit margin of 15 percent. What is Oceanside's AU ratio?

Accepted Answer

A) 1.05 percent 
B) 3.55 percent 
C) 5.56 percent 
D) 6.45 percent 
E) 7.02 percent

Question 10

Uniform principles,standards,and report forms for depository institutions are prescribed by the

Accepted Answer

A) FDIC. 
B) Federal Reserve. 
C) Federal Financial Institutions Examination Council. 
D) Office of Comptroller of Currency.

Question 11

Wholesale CDs obtained from an investment house rather than directly from a customer are referred to as brokered deposits.

Accepted Answer

A) True 
 B)False

Question 12

a(n.__________________ is a contra asset account.

Accepted Answer

A) loan commitment 
B) provision for loan and lease losses 
C) allowance for loan and lease losses 
D) net charge-off

Question 13

Banks generally pay higher interest rates on NOW accounts than on MMDAs.

Accepted Answer

A) True 
 B)False

Question 14

The allowance for loan and lease losses is bank management's estimate of the amount of gross loans and leases that will not be repaid to the bank.

Accepted Answer

A) True 
 B)False

Question 15

A bank has interest income to total assets ratio of 5.45 percent and has noninterest income of $45 million and total assets of $700 million. What is the bank's asset utilization ratio?

Accepted Answer

A) 5.45 percent 
B) 6.43 percent 
C) 9.67 percent 
D) 15.02 percent 
E) 11.88 percent

Question 16

C&I loans are loans to businesses used to finance capital needs,equipment purchases,and plant expansions.

Accepted Answer

A) True 
 B)False

Question 17

If a bank has more purchased funds than the average bank,you would not be surprised to see a higher than average ____________________ ratio.

Accepted Answer

A) provision for loan loss 
B) tax 
C) noninterest expense 
D) interest expense 
E) none of the options

Question 18

MMDAs are a type of savings account that has some limited checking features. These accounts were designed to help banks compete with MMMFs.

Accepted Answer

A) True 
 B)False

Question 19

Blue Ridge Bank has a PM of 12 percent,an interest income to total assets ratio of 6.00 percent,and a noninterest income to assets ratio of 1.50 percent. Blue Ridge also has $9 in assets per dollar in equity capital. Blue Ridge's ROE is

Accepted Answer

A) 7.50 percent. 
B) 9.00 percent. 
C) 8.10 percent. 
D) 6.48 percent. 
E) 5.75 percent.

Question 20

Interest-bearing retail accounts with limited checking features designed to compete with money market mutual fund investments are called ________________.

Accepted Answer

A) NOWs 
B) retail CDs 
C) MMDAs 
D) special savings deposits 
E) negotiable CDs

Exam 12: Commercial Banks Financial Statements and Analysis

At almost all banks noninterest expense is greater than noninterest income; hence,the overhead efficiency ratio is usually greater than 100 percent.

Fernando Bank has interest expense of $150 million,earning assets of $1,400 million and a NIM of 5.00 percent. The bank also has interest-bearing liabilities of $1,100 million. Fernando Bank's spread is

Rate-sensitive funding sources at a bank are termed core deposits.

Which one of the following is the definition of the NIM?

A wholesale bank is one that focuses its business activities on commercial banking relationships.

All but which one of the following is an example of noninterest income or noninterest expense?

The largest source of income at a typical bank is

Investment securities plus ____________________ is equal to a bank's earning assets.

Oceanside Bank converts a dollar of equity into 10 cents of net income and has $9.50 in assets per dollar of equity capital. Oceanside also has a profit margin of 15 percent. What is Oceanside's AU ratio?

Uniform principles,standards,and report forms for depository institutions are prescribed by the

Wholesale CDs obtained from an investment house rather than directly from a customer are referred to as brokered deposits.

a(n.__________________ is a contra asset account.

Banks generally pay higher interest rates on NOW accounts than on MMDAs.

The allowance for loan and lease losses is bank management's estimate of the amount of gross loans and leases that will not be repaid to the bank.

A bank has interest income to total assets ratio of 5.45 percent and has noninterest income of $45 million and total assets of $700 million. What is the bank's asset utilization ratio?

C&I loans are loans to businesses used to finance capital needs,equipment purchases,and plant expansions.

If a bank has more purchased funds than the average bank,you would not be surprised to see a higher than average ____________________ ratio.

MMDAs are a type of savings account that has some limited checking features. These accounts were designed to help banks compete with MMMFs.

Blue Ridge Bank has a PM of 12 percent,an interest income to total assets ratio of 6.00 percent,and a noninterest income to assets ratio of 1.50 percent. Blue Ridge also has $9 in assets per dollar in equity capital. Blue Ridge's ROE is

Interest-bearing retail accounts with limited checking features designed to compete with money market mutual fund investments are called ________________.