slike bài giảng quản trị ngân hàng chương 2 financial statements of bank

Report of condition - Balance sheet  The Balance sheet of a bank showing its Assets, Liabilities and Net worth at a given point in time Assets = Liabilities + Equity  May be viewed as

William Chittenden edited and updated the PowerPoint slides for this edition.

FINANCIAL STATEMENTS OF BANKSChapter 2

3 3 Recent expansion of off-balance sheet items

4 4 Components of the Income statement:

Revenues and Expenses

5 5 Financial statement manipulation

Bank financial statements

 Report of condition – Balance sheet

 Report of income – Income statement

5-4

Report of condition - Balance sheet

 The Balance sheet of a bank showing its

Assets, Liabilities and Net worth at a given

point in time

Assets = Liabilities + Equity

 May be viewed as a list of financial inputs

(sources of funds) and outputs (uses of funds)

borrowings

EC = Equity capital

5-6

Balance sheet

Bank assets

 Cash and due from banks

 Vault cash, deposits held at the Fed and other financial institutions, and cash items in the process of collection

 Investment securities

 Securities held to earn interest and help meet liquidity needs

 Loans

 The major asset, generate the greatest amount of

income, exhibit the highest default risk and are relatively illiquid

 Other assets

 Bank premises and equipment, interest receivable,

prepaid expenses, other real estate owned, and

customers' liability to the bank

Balance Sheet (assets): PNC and Community National Bank

Dec-03 % of Dec-04 % of Dec-03 % of Dec-04 % of

BALANCE SHEET % Cha 1,000 Total % Cha 1,000 Total % Cha 1,000 Total % Cha 1,000 Total

ASSETS

Loans:

Real estate loans 1.2% 15,639,089 25.2% 32.4% 20,701,904 28.0% 4.0% 75,324 39.1% 12.9% 85,050 40.5% Commercial loans -8.4% 11,879,285 19.2% 23.8% 14,707,458 19.9% -5.8% 34,288 17.8% 12.9% 38,716 18.4% Individual loans -4.4% 2,501,847 4.0% 52.6% 3,816,861 5.2% 26.7% 8,454 4.4% -5.2% 8,011 3.8% Agricultural loans 9.2% 984 0.0% 57.0% 1,545 0.0% 0.0% 0 0.0% 0.0% 0 0.0% Other LN&LS in domestic off -20.5% 3,022,795 4.9% -0.8% 2,999,113 4.1% 13.0% 26 0.0% 284.6% 100 0.0% LN&LS in foreign off 15.6% 1,190,025 1.9% 2.8% 1,222,904 1.7% 0.0% 0 0.0% 0.0% 0 0.0% Gross Loans & Leases -4.6% 34,234,025 55.2% 26.9% 43,449,785 58.9% 2.2% 118,092 61.3% 11.7% 131,877 62.8% Less: Unearned Income 8.0% 44,867 0.1% 0.2% 44,949 0.1% 0.0% 0 0.0% 0.0% 0 0.0% Memo: Total loans -4.6% 34,189,158 55.1% 27.0% 43,404,836 58.8% 2.2% 118,092 61.3% 11.7% 131,877 62.8% Loan & Lease loss Allowance -5.8% 606,886 1.0% -3.8% 583,915 0.8% 6.7% 1,258 0.7% 28.5% 1,617 0.8% Net Loans & Leases -4.5% 33,582,272 54.1% 27.5% 42,820,921 58.0% 2.2% 116,834 60.6% 11.5% 130,260 62.0% Investments:

U.S Treasury & Agency securities 90.6% 5,574,108 9.0% 15.9% 6,460,936 8.8% 73.9% 34,937 18.1% 24.8% 43,591 20.7% Municipal securities -46.9% 7,719 0.0% 1606.0% 131,685 0.2% -0.5% 613 0.3% -0.5% 610 0.3% Foreign debt securities -100.0% 0 0.0% 0% 0 0.0% 0.0% 0 0.0% 0% 0 0.0% All other securities 1.1% 8,804,028 14.2% 3.0% 9,064,146 12.3% #N/A 2,104 1.1% -2.2% 2,057 1.0% Interest bearing bank balances 16.4% 259,318 0.4% 51.8% 393,713 0.5% #N/A 4,428 2.3% -57.5% 1,881 0.9% Fed funds sold & resales -54.6% 1,106,733 1.8% 56.2% 1,728,372 2.3% 175.0% 7,000 3.6% -21.4% 5,500 2.6% Trading account assets -9.1% 935,042 1.5% 78.3% 1,667,330 2.3% 0.0% 0 0.0% 0.0% 0 0.0% Total Investments 8.7% 16,686,948 26.9% 16.5% 19,446,182 26.3% 111.1% 49,082 25.5% 9.3% 53,639 25.5% Total Earning Assets -0.5% 50,269,220 81.1% 23.9% 62,267,103 84.4% 20.6% 165,916 86.1% 10.8% 183,899 87.5% Nonint Cash & Due from banks -6.9% 2,926,330 4.7% 8.5% 3,174,493 4.3% -16.6% 13,083 6.8% -10.7% 11,682 5.6% Premises, fixed assets & capital leases 24.4% 1,039,603 1.7% 2.5% 1,066,028 1.4% 12.2% 5,642 2.9% 2.2% 5,768 2.7% Other real estate owned 21.8% 14,208 0.0% 0.7% 14,301 0.0% -84.3% 325 0.2% -100.0% 0 0.0% Investment in unconsolidated subs 252.4% 17,386 0.0% -12.4% 15,223 0.0% 0.0% 0 0.0% 0.0% 0 0.0% Acceptances and other assets 51.8% 7,754,149 12.5% -6.2% 7,272,017 9.9% 259.8% 7,761 4.0% 13.2% 8,783 4.2%

Total Assets 4.0% 62,020,896 100.0% 19.0% 73,809,165 100.0% 18.6% 192,727 100.0% 9.0% 210,132 100.0% Average Assets During Quarter 6.8% 62,719,462 101.1% 17.0% 73,391,052 99.4% 17.5% 191,480 99.4% 9.4% 209,525 99.7%

PNC BANK, NATIONAL ASSOCIATION COMMUNITY NATIONAL BANK

Cash assets

 Account is called cash and deposits due from bank

 Includes:

 Vault cash

 Deposits with other banks (correspondent deposits)

 Cash Items in process of collection

 Reserve account with the Federal Reserve

(sometimes called primary reserves )

5-9

Securities: the liquid portion

 Often called secondary reserves, include:

 Short term government securities

 Privately issued money market securities

 Interest bearing time deposits

 Commercial paper

5-10

Investment securities

 These are the income generating portion of

securities

 Taxable securities

 U.S Government notes

 Government agency securities

 Corporate bonds

 Tax-exempt securities

 Municipal bonds

5-11

Trading account assets

 Securities purchased to provide short-term

profits from short-term price movements

 When bank acts as a securities dealer

 Valued at market – FASB 115

5-12

Federal funds sold and reverse

repurchase agreements

 A type of loan account

 Generally overnight loans

 Federal funds sold - funds come from the

deposits at the Federal Reserve

 Reverse repurchase agreements – bank takes

temporary title to securities owned by borrower

5-13

Bank investments and FASB 115

 Following FASB 115, a bank, at purchase, must

designate the objective behind buying investment

securities as either:

 Held-to-maturity securities are recorded on the balance

 Trading account securities are actively bought and sold,

so the bank marks the securities to market (reports them

all gains and losses on the income statement

 Available-for-sale , all other investment securities, are

corresponding change to stockholders’ equity as

unrealized gains and losses on securities holdings; no income statement impact.

Bank investments and FASB 115

amortized cost, market value (fair value)

http://books.google.com.vn/books?

id=c3f0AegbDx4C&pg=PA221&lpg=PA221&dq=amortiz ed+cost&source=bl&ots=PYzqn9tqrJ&sig=0qSsODiLgsl 3_fDOZJWo91L4Zu8&hl=vi&ei=RfKHS6PBKNegkQWU grmhDw&sa=X&oi=book_result&ct=result&resnum=7&v ed=0CCUQ6AEwBg#v=onepage&q=amortized

%20cost&f=false

Loan accounts

 The major asset

 Gross loans – sum of all loans

 Allowance for possible loan losses

 Contra asset account

 For potential future loan losses

 Net loans

 Unearned discount income

 Nonperforming loans

5-16

Types of loans

 Commercial and industrial loans

 Consumer loans (loans to individuals)

 Real estate loans

 Financial institution loans

Adjustments to total loans

…three adjustments are made to obtain a net loan figure.

1. Leases are included in gross loans

interest received

3. Gross loans are reduced by the dollar

magnitude of a bank's loan-loss reserve, which exists in recognition that some loans will not be repaid

Specific and general reserves

 Set aside to cover a particular loan

 Designate a portion of ALL or

 Add more reserves to ALL

 Remaining ALL

and government regulation

transfer reserves

ALL : Allowance for loan losses

5-19

Allowance for loan losses (ALL)

Beginning ALL

+ Provision for loan loss (Income statement)

= Adjusted allowance for loan losses

- Actual charge-offs

+ Recoveries from previous charge-offs

= Ending allowance for loan losses

VN: see Decision 493/2005/QD-NHNN

5-20

Provisions for loan losses

Provisions for loan losses

Reserve for Loan Losses

Recoveries

Charge offs

Average assets, capital and loan loss data: PNC and Community NB

Enter analysts name here Dec-03 % of Dec-04 % of Dec-03 % of Dec-04 % of

SUPPLEMENTAL DATA Pg # % Cha $ 1,000 Total % Cha $ 1,000 Total % Cha $ 1,000 Total % Cha $ 1,000 Total

Average Assets 1 2.36% 60,890,137 14.30% 69,596,163 11.59% 176,531 13.45% 200,271

Domestic Banking offices 3 0.59% 684 7.75% 737 0.00% 5 20.00% 6

Foreign Branches 3 0.00% 8 0.00% 8 0.00% 0 0.00% 0

Number of equivalent employees 3 -1.72% 15,147 3.49% 15,675 -3.02% 64 9.85% 71

SUMMARY OF RISK BASED CAPITAL

Net Tier One 11A -0.49% 5,134,748 9.9% -0.90% 5,088,306 8.4% 14.19% 14,005 10.7% 9.09% 15,278 10.3% Net Eligible Tier Two 11A -9.20% 1,566,924 3.0% 28.12% 2,007,618 3.3% 6.70% 1,258 1.0% 28.54% 1,617 1.1% Tier Three 11A 36.19% (12,269) 0.0% 408.06% (62,334) -0.1% 0.00% 0 0.0% 0.00% 0 0.0% Deductions 11A -2.73% 6,689,403 12.9% 5.15% 7,033,591 11.5% 13.53% 15,263 11.7% 10.69% 16,895 11.4% Total-risk-based-capital 11A -2.73% 13,378,806 25.8% 5.15% 14,067,181 23.1% 13.53% 30,526 23.4% 10.69% 33,790 22.7% Total Risk-Weighted Assets 11A -1.95% 51,908,044 100.0% 17.32% 60,897,630 100.0% 12.72% 130,506 100.0% 14.03% 148,814 100.0%

SUMMARY OF LOAN LOSS ACCOUNT

Balance at beginning of period 7 6.92% 644,475 1.8% -5.83% 606,886 1.5% 38.87% 1,179 1.0% 6.70% 1,258 1.0% Gross Credit Losses 7 2.40% 255,377 0.7% -36.75% 161,537 0.4% 277.91% 616 0.5% -57.79% 260 0.2% Memo: Loans HFS Writedown 7 14.01% 26,060 0.1% -67.16% 8,558 0.0% 0.00% 0 0.0% 0.00% 0 0.0% Recoveries 7 11.29% 47,453 0.1% 5.05% 49,849 0.1% -15.38% 11 0.0% 72.73% 19 0.0% Net Credit Losses 7 0.56% 207,924 0.6% -46.28% 111,688 0.3% 303.33% 605 0.5% -60.17% 241 0.2% Provisions for Credit Losses 7 -39.11% 176,612 0.5% -70.81% 51,553 0.1% 42.50% 684 0.6% -12.28% 600 0.5% Other Adjustments 7 -84.91% (6,277) 0.0% -692.07% 37,164 0.1% 0.00% 0 0.0% 0.00% 0 0.0% Balance at end of period 7 -5.83% 606,886 1.7% -3.79% 583,915 1.5% 6.70% 1,258 1.1% 28.54% 1,617 1.3% Average Total Loans & Leases 7 -8.74% 35,193,158 100.0% 13.55% 39,960,849 100.0% 5.43% 114,953 100.0% 7.38% 123,431 100.0%

NON-CURRENT LN&LS

90 days and over past due 8 -53.71% 72,963 0.2% -20.54% 57,979 0.1% -38.05% 184 0.2% -100.00% 0 0.0% Total Nonaccrual Ln&LS 8 -21.98% 270,782 0.8% -47.60% 141,887 0.4% -42.61% 229 0.2% -9.17% 208 0.2% Total Non-current LN&LS 8 -31.89% 343,745 1.0% -41.86% 199,866 0.5% -40.66% 413 0.4% -49.64% 208 0.2% Ln&Ls 30-89 Days Past Due 8 -49.74% 126,455 0.4% -25.05% 94,779 0.2% -68.98% 844 0.7% 167.89% 2,261 1.8% Restructured LN&LS 90+ Days P/D 8 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0% Restructured LN&LS Nonaccrual 8 -65.1% 424 0.0% -100.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0% Current Restructured LN&LS 8 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0% All other real estate owned 8 21.8% 14,208 0.0% 0.7% 14,301 0.0% -84.3% 325 0.3% -100.0% 0 0.0%

PNC BANK, NATIONAL ASSOCIATION COMMUNITY NATIONAL BANK

Miscellaneous assets

 Bank premises and fixed assets

 Other real estate owned (OREO)

 Goodwill and other intangibles

5-23

Bank liabilities

 Non interest-bearing demand deposits

 Transactions accounts that pay no interest

 Negotiable orders of withdrawal (NOWs) and

automatic transfers from savings (ATS) accounts

 Pay interest set by each bank without federal

restrictions

 Money market deposit accounts (MMDAs)

 Pay market rates, but a customer is limited to no

more than six checks or automatic transfers each month

 Savings and time deposits represent the bulk of interest-bearing liabilities at banks.

Bank liabilities (cont.)

 Two general time deposits categories exist:

 Time deposits in excess of $100,000, labeled

jumbo certificates of deposit (CDs).

 Small CDs, considered core deposits which tend

to be stable deposits that are typically not

withdrawn over short periods of time.

 Deposits held in foreign offices

 Balances issued by a bank subsidiary located outside the U.S.

Non-deposit borrowings

 Fed funds purchased

 Securities sold under agreement to repurchase

(repurchase agreements)

 Acceptances outstanding

 Eurocurrency borrowings

 Subordinated debt ( Notes and bonds with

maturities in excess of one year)

 Limited life preferred stock

 Other liabilities

5-26

Core versus volatile funds

 Core deposits are stable deposits that are not highly

interest rate-sensitive

location of the bank

small time deposits.

 Large, or volatile, borrowings are liabilities that are highly rate-sensitive.

offices, federal funds purchased, repurchase agreements, and other borrowings with maturities less than one year.*

*The UBPR (Uniform Bank Performance Report ) also includes brokered deposits less than $100,000 and maturing within one year in the definition of net non-core liabilities.

Balance Sheet (liabilities): PNC and Community National Bank

Dec-03 % of Dec-04 % of Dec-03 % of Dec-04 % of

BALANCE SHEET % Cha 1,000 Total % Cha 1,000 Total % Cha 1,000 Total % Cha 1,000 Total

LIABILITIES

Demand deposits 2.6% 7,070,434 11.4% 20.1% 8,488,607 11.5% 12.6% 72,500 37.6% 12.4% 81,514 38.8% All NOW & ATS Accounts 9.9% 1,529,861 2.5% 8.9% 1,666,003 2.3% 15.5% 12,478 6.5% 39.7% 17,437 8.3% Money market deposit accounts 6.8% 24,502,371 39.5% 8.8% 26,665,024 36.1% 56.7% 46,458 24.1% 5.3% 48,908 23.3% Other savings deposits 5.0% 2,055,659 3.3% 35.4% 2,782,931 3.8% 7.3% 7,812 4.1% 26.7% 9,896 4.7% Time deposits under $100M -15.9% 6,242,628 10.1% 13.1% 7,063,499 9.6% 4.0% 24,469 12.7% -14.4% 20,949 10.0% Core Deposits 2.0% 41,400,953 66.8% 12.7% 46,666,064 63.2% 20.7% 163,717 84.9% 9.2% 178,704 85.0% Time deposits of $100M or more -17.6% 1,775,943 2.9% 80.5% 3,205,331 4.3% 4.9% 13,572 7.0% 8.4% 14,714 7.0% Deposits held in foreign offices 71.5% 2,371,548 3.8% 26.3% 2,994,623 4.1% 0.0% 0 0.0% 0.0% 0 0.0% Total deposits 3.2% 45,548,444 73.4% 16.1% 52,866,018 71.6% 19.3% 177,289 92.0% 9.1% 193,418 92.0% Fed funds purchased & resale 25.2% 499,232 0.8% 221.8% 1,606,647 2.2% 0.0% 1,000 0.5% 0.0% 1,000 0.5% FHLB borrowings < 1 Yr 898.2% 1,000,000 1.6% -100.0% 0 0.0% 0.0% 0 0.0% 0.0% 0 0.0% Other borrowings inc mat < 1 yr 99.4% 2,264,921 3.7% 34.5% 3,046,632 4.1% 0.0% 0 0.0% 0.0% 0 0.0% Memo: S.T non core funding 73.5% 7,111,124 11.5% 25.7% 8,936,809 12.1% 0.1% 7,901 4.1% 28.7% 10,169 4.8% Memo: S.T Volatile liabilities 36.2% 6,911,644 11.1% 57.0% 10,853,233 14.7% 4.5% 14,572 7.6% 7.8% 15,714 7.5% FHLB borrowings > 1 Yr -90.0% 115,406 0.2% -23.3% 88,508 0.1% 0.0% 0 0.0% 0.0% 0 0.0% Other borrowings inc mat > 1 yr -2.9% 1,765,851 2.8% 105.2% 3,624,223 4.9% 0.0% 0 0.0% 0.0% 0 0.0% Acceptances & other liabilities -0.1% 3,864,388 6.2% 18.7% 4,585,994 6.2% -11.0% 395 0.2% 31.6% 520 0.2% Total Liabilities before Sub Notes 4.6% 55,058,242 88.8% 19.5% 65,818,022 89.2% 19.1% 178,684 92.7% 9.1% 194,938 92.8% Sub Notes & Debentures 16.2% 1,340,133 2.2% 41.4% 1,895,482 2.6% 0.0% 0 0.0% 0.0% 0 0.0% Total Liabilities 4.9% 56,398,375 90.9% 20.1% 67,713,504 91.7% 19.1% 178,684 92.7% 9.1% 194,938 92.8% All common and preferred capital -4.1% 5,622,521 9.1% 8.4% 6,095,661 8.3% 12.0% 14,043 7.3% 8.2% 15,194 7.2%

Total Liabilities & Capital 4.0% 62,020,896 100.0% 19.0% 73,809,165 100.0% 18.6% 192,727 100.0% 9.0% 210,132 100.0% Memoranda:

Officer, Shareholder Loans (#) 0.0% 2 0.0% 50.0% 3 0.0% -50.0% 1 0.0% 0.0% 1 0.0% Officer, Shareholder Loans ($) -19.4% 14,211 0.0% 58.0% 22,449 0.0% 31.7% 1,852 1.0% 22.2% 2,263 1.1% Non-investment ORE 21.8% 14,208 0.0% 0.7% 14,301 0.0% -84.3% 325 0.2% -100.0% 0 0.0% Loans Held for Sale -10.2% 1,378,603 2.2% 20.9% 1,667,154 2.3% 0.0% 0 0.0% 0.0% 0 0.0% Held-to Maturity Securities #N/A 2,114 0.0% -100.0% 0 0.0% 36.7% 4,073 2.1% -56.2% 1,785 0.8% Available-for-Sale-Securities 23.4% 14,383,741 23.2% 8.9% 15,656,767 21.2% 89.4% 33,581 17.4% 32.4% 44,473 21.2% Total Securities 23.4% 14,385,855 23.2% 8.8% 15,656,767 21.2% 81.8% 37,654 19.5% 22.9% 46,258 22.0% All Brokered Deposits 14.2% 1,533,123 2.5% 49.3% 2,289,151 3.1% 0.0% 0 0.0% 0.0% 0 0.0%

PNC BANK, NATIONAL ASSOCIATION COMMUNITY NATIONAL BANK