Introduction (5) Bank financial statements (1) Balance Sheet (B) Liabilities  Two major categories of liabilities are included in the balance sheet: (1) Deposits made by and owed to various customers. (2) Non-deposits borrowing of funds in the money and capital market. 1 6/12/2016

Introduction (5) Bank financial statements (1) Balance Sheet (B) Liabilities (1) Deposits made by and owed to various customers.  Deposits are the main source of funding for banks.  There are four kinds of deposits: (1) Demand deposits: represent customer deposits in regular checking accounts that do not pay interest. 2 6/12/2016

Introduction (5) Bank financial statements (1) Balance Sheet (2) NOW accounts (Negotiable order accounts): represent checking accounts that pay interest. (3) Saving deposits: represent the traditional saving accounts that bear the lowest rate of interest. (4) Time deposits: represent high-yielding saving certificate offered by banks and usually carry a fixed term and a stipulated interest rate. 3 Dr. Amr Nazieh 6/12/2016

Introduction (5) Bank financial statements (1) Balance Sheet  Summary of deposit account: Noninterest-Bearing Demand Deposits or regular checking account Savings Deposits (bear the lowest interest rate) Now Accounts (Individuals and not-for profit) Time Deposits (certificate of deposits) 4 6/12/2016

Introduction (5) Bank financial statements (1) Balance Sheet (B) Liabilities (2) Non-deposits borrowing of funds in the money and capital market.  Represent the banks temporary borrowing in the money market, mainly from reserves loaned to the bank by the Central bank in Egypt.  These transactions are carried out mainly to supplement deposits and provide the additional liquidity that cash assets and securities cannot provide. 5 6/12/2016

Introduction (5) Bank financial statements (1) Balance Sheet (C) Owners’ Equity  Equity capital: or the shareholders’ equity supplies the long-term and relatively stable base of financial support upon which the bank will rely to grow and to cover any extraordinary losses it incurs. 6 6/12/2016

Introduction (5) Bank financial statements (1) Balance Sheet  Owners’ equity includes the following: (1) Preferred Stock (2) Common Stock o Common Stock authorized and Outstanding (3) Capital Surplus. (4) Retained Earnings (Undivided Profits). (5) Treasury Stock. (6) Contingency Reserve. 7 6/12/2016

Introduction (5) Bank financial statements (1) Balance Sheet  Liabilities and equity capital represent accumulated sources of funds, which provide the needed spending power for the bank to acquire its assets.  On the other hand, a bank’s assets represent the accumulated uses of funds, which are made to generate income for shareholders, pay interest to depositors, and compensate the bank’s employees. 8 6/12/2016

Introduction (5) Bank financial statements (1) Balance Sheet Accumulated uses of funds (Assets) Accumulated sources of funds (liabilities and equity capital) 9 6/12/2016

Introduction (5) Bank financial statements (1) Balance Sheet  Extended accounting equations C + S + L + MA = D + NDB + CA  C = Cash Assets  S = Security Holdings  L = Loans  MA = Miscellaneous Assets  D = Deposits  NDB = Nondeposit Borrowings  CA = Capital Accounts 10 6/12/2016

Bank Misr - Balance sheet Dec. 31, 2005 Assets Cash and deposits due from banks Interest-bearing deposits in banks Investment securities (market value L.E. 92,450) Trading securities Reserve funds sold and securities purchased under resale agreements 56,80022,90094,80033,70021, /12/2016

Assets Loans (gross) Different types of loans - Allowances for possible loans losses - Unearned discount loans - Loans (net) Lease financing receivables Bank premises and equipment 222,500(4,800)(2,500)215,20010,00023, /12/2016

Assets Other Assets Total assets 11,300499,350 6/12/

Liabilities Deposits: Demand deposits NOW accounts Saving deposits Time deposits Deposits at foreign branches Total deposits 32,80038,55072,40084,10024,600252,450 6/12/

Liabilities Nondeposits Borrowings: Reserve funds Other short-term debt Mortgage indebtedness Subordinates notes and debentures Other Liabilities Acceptance outstanding Miscellaneous liabilities Total liabilities 12,80013,60015,90025,7008,6005,300334,350 6/12/

Stockholders’ equity Common stock, par value L.E. 100; 6,000,000 shares authorized and outstanding Capital surplus Retained earnings Treasury stock Total stockholders’ equity Total liabilities and stockholders’ equity 60,00065,00045,000(5,000)165,000499,350 6/12/