Course Review

Course Overview ► Fin’l Statements  Construction, S/U, Overview w /Ratios  Main Asset and Liability Descriptions ► Mgmt by Spread over Cost of Funds ► Asset/ Liability Mgmt  NII Frcst, Wealth Frcst ► Mgmt of Capital and Derivatives ► Regulation and Current Topics

Fin’l Statements  Construction ► Productive assets not PP&E, but Loans/Invmts  S/U ► For noting performance ► For Forecasting Funding Needs  Ratios: ► Profitability, Capital/Risks, Liquidity ► Breakdown of ROE, ROA (Spread+Burd-OT) ► Risk and Liquidity of Assets and Capital

Fin’l Statements  Main Asset Descriptions ► Investments  Description of USTs, Agencies and Muni’s  Tax issues with Muni Income for Banks  Investment Management Styles ► Loans, Comm’l & Retail  Characteristics of Loan Class  Evaluation of Loans  Pricing Techniques

Mgmt by Spread over Cost of Funds ► Cost of Funds ► Base is Net Deposits  Total Dep+FFPurch+FRB-Cash&DueFrom ► Costs are Int and Non-Int Expenses  Total Int Paid (excluding Cap Note Int)  Non-Int Expenses from each account times its related expense multiplier (take as given)  Less Net Service Charge Income ► Cost of Funds = Costs * 4 / Base

Asset/ Liability Mgmt  NII Frcst (Maturity Gap) ► Either by time bucket or across time buckets ►  NII = Gap *  R ► Remember Suggested Gaps given Int Rate Frcst  Wealth Frcst (Duration Gap) ► Duration of Assets and Liabilities ►  E = -[ D A - D L (L/A)] * (  R/(1+R) * A ► Remember Suggested Gaps given Int Rate Frcst

Mgmt of Capital and Derivatives ► Capital Adequacy  Standards, Calculation: Sim & Tiered World  Problems  CAMELS ► Derivatives  Fin’l Futures