2. BS Trainig Services bsenver@superonline.com 1 ANALYSIS OF THE BALANCE SHEETS OF COMMERCIAL BANKS AD-477 BANK MANAGEMENT Instructor……Bülent Şenver

3. BS Trainig Services bsenver@superonline.com 2 BALANCE SHEET ANALYSIS OF COMMERCIAL BANKS

4. BS Trainig Services bsenver@superonline.com 3 ANNUAL REPORT OFBANKS

5. BS Trainig Services bsenver@superonline.com 4 ANNUAL REPORT 1. AUDITOR’S REPORT (AR) 2. FINANCIAL STATEMENTS (F/S) 3. NOTES TO F/S

6. BS Trainig Services bsenver@superonline.com 5 AUDITOR’S REPORT “ INDEPENDENT AUDITOR’S REPORT”

7. BS Trainig Services bsenver@superonline.com 6 INDEPENDENT AUDITORS’ REPORT 1.What is done ? 2.What is audited ? 3.What is the auditor’s & management’s responsibility ? 4.Audit is done based on what standard ? 5.Auditors’ opinion based on IAS

8. BS Trainig Services bsenver@superonline.com 7 WHAT IS AUDITED ? We have audited : 1. The Balance Sheet as of Dec31’ 1998 and 2. Statement of Income 3. Statement of Shareholders’ 4. Statement of Cash Flows for the year then ended

9. BS Trainig Services bsenver@superonline.com 8 HOW IS THE F/S AUDITED ? We conducted our audit in accordance with International Standards on Auditing (ISA) We plan & perform the audit to obtain reasonable assurance that F/S are free of material misstatement.

10. BS Trainig Services bsenver@superonline.com 9 HOW IS THE F/S AUDITED ? An audit includes assessing the accounting principles used & significant estimates made by management, as well as evaluating the overall F/S presentation. We believe our audit provides a reasonable basis for our opinion.

11. BS Trainig Services bsenver@superonline.com 10 AUDITORS’ OPINION In our opinion, the F/S referred to above present fairly, in all material respects, the financial position of A Bank & the results of its operations, changes in its cash flows for the year then ended, in accordance with International Accounting Standards. Arthur Andersen & Co

12. BS Trainig Services bsenver@superonline.com 11 FINANCIAL STATEMENTS OF COMMERCIAL BANKS

13. BS Trainig Services bsenver@superonline.com 12 FINANCIAL STATEMENTS 1. BALANCE SHEET 2. STATEMENT OF INCOME 3. STATEMENT OF SHAREHOLDER’S EQUITY 4. SOURCES & USES OF FUNDS STATEMENT

14. BS Trainig Services bsenver@superonline.com 13 B/S ANALYSIS DEPENDS ON Available Data Standard Reporting Practice Use of Internationally Accepted Accounting Standards Use of Internationally Accepted Auditing Standards Use of External & Internal Audit Practice

15. BS Trainig Services bsenver@superonline.com 14 BALANCE SHEET SHOWS The Financial Position of a Bank As at a specific date. As of Dec. 31,1998

16. BS Trainig Services bsenver@superonline.com 15 BALANCE SHEET EQUATION 100 = ASSETS = Equals = 100 LIABILITIES + Plus SHAREHOLDER’S EQUITY

17. BS Trainig Services bsenver@superonline.com 16 BALANCE SHEET Assets Liquid Assets 150 Loans 400 Marketable Securities 200 Investment Securities 50 Fixed Assets 100 Accrued Interest 70 Other Assets 80 Total Assets 1050

18. BS Trainig Services bsenver@superonline.com 17 BALANCE SHEET Liabilities Deposits 400 Bank Borrowings 150 Accrued Expenses 100 Other Liabilities 80 Bonds Issued 70 Shareholder’s Equity 250 Total Liabilities & S/HE 1050

19. BS Trainig Services bsenver@superonline.com 18 SHAREHOLDER’S EQUITY Share Capital 100 Legal Reserves 30 Retained Earnings 50 Revaluation Surplus 20 Share Premiums 10 Net Income 40 Total S/H Equity 250

20. BS Trainig Services bsenver@superonline.com 19 ASSET VALUATION GAAP & IAAP Generally Accepted & Internationally Accepted Accounting Principles LOWER OF COST OR MARKET

21. BS Trainig Services bsenver@superonline.com 20 ASSET CLASSIFICATION

22. BS Trainig Services bsenver@superonline.com 21 LIABILITY CLASSIFICATION

23. BS Trainig Services bsenver@superonline.com 22 BALANCE SHEET DOES NOT SHOW Interest Rates Interest Sensitivity Due Dates Foreign Currency breakdown Collateral

24. BS Trainig Services bsenver@superonline.com 23 STATEMENT OF INCOME SHOWS The results of operations of a bank. For the period between two dates. For the year ended Dec. 31, 1998

25. BS Trainig Services bsenver@superonline.com 24 NET PROFIT

26. BS Trainig Services bsenver@superonline.com 25 TOTAL INCOME

27. BS Trainig Services bsenver@superonline.com 26 NET INTEREST INCOME

28. BS Trainig Services bsenver@superonline.com 27 NET INTEREST INCOME

29. BS Trainig Services bsenver@superonline.com 28 NET NON-INTEREST INCOME

30. BS Trainig Services bsenver@superonline.com 29 STATEMENT OF INCOME Interest Income 1000 Interest Expense (700) Net I.Income 300 Non Interest Income 220 Operating Expenses (450) Pre-Tax Profit 70 Tax Provision (30) Net Income 40

31. BS Trainig Services bsenver@superonline.com 30 ANALYSIS OF PROFIT

32. BS Trainig Services bsenver@superonline.com 31 BANKING RISKS

33. BS Trainig Services bsenver@superonline.com 32 BANKING RISKS C AMELC AMEL A M E L

34. BS Trainig Services bsenver@superonline.com 33 C AMEL Capital AdequacyCapital Adequacy

35. BS Trainig Services bsenver@superonline.com 34 C A MEL Asset QualityAsset Quality

36. BS Trainig Services bsenver@superonline.com 35 CA M EL Management QualityManagement Quality

37. BS Trainig Services bsenver@superonline.com 36 CAM E L Earnings EfficiencyEarnings Efficiency

38. BS Trainig Services bsenver@superonline.com 37 CAME L Liquidity RiskLiquidity Risk

39. BS Trainig Services bsenver@superonline.com 38 CAMEL RISKS Capital AdequacyCapital Adequacy Asset QualityAsset Quality ManagementManagement EarningsEarnings LiquidityLiquidity

40. BS Trainig Services bsenver@superonline.com 39 BANKING RISKS 1.2.3.4.5.CAMEL 6. Credit Risk 7. Interest Rate Risk 8. Interest Rate Sensitivity Risk 9. Foreign Exchange Availability Risk 10. F/X Position Risk

41. BS Trainig Services bsenver@superonline.com 40 BANKING RISKS 11. Accounting & Reporting Risk 12. Computer Risk 13. Capital Market Operations Risk 14. Money Market Operations Risk 15. Country (Sovereign) Risk 16. Pricing Risk

42. BS Trainig Services bsenver@superonline.com 41 BANKING RISKS 17. Theft Risk 18. Fraud & Defalcations Risk 19. Natural Disasters 20. Strategic Risk 21. Reputation Risk 22. Market Risk 23. Fiduciary Risk 24. Transaction Risk 25. Regulatory / Compliance Risk 26. Large Loans / Deposits Risk 27. Concentration Risk

43. BS Trainig Services bsenver@superonline.com 42 RATIO ANALYSIS Numerator ______________________ Denominator

44. BS Trainig Services bsenver@superonline.com 43 RATIO ANALYSIS Balance Sheet __________________ Balance Sheet Income Statement ________________ Balance Sheet

45. BS Trainig Services bsenver@superonline.com 44 RATIO ANALYSIS What is the LEVEL ? What is the TREND ?

46. BS Trainig Services bsenver@superonline.com 45 RATIO ANALYSIS 1. Capital Adequacy 2. Asset Quality 3. Management 4. Earnings & Efficiency 5. Liquidity

47. BS Trainig Services bsenver@superonline.com 46 CAPITALADEQUACY RATIO ANALISIS CAPITAL ADEQUACY “The Capital of a Bank protects the Bank against unexpected future losses.”

48. BS Trainig Services bsenver@superonline.com 47 CAPITAL ADEQUACY RATIO ANALYSIS CAPITAL ADEQUACY 1. Shareholders’ Equity ------------------------------------ Total Assets The ability of the present Capital to support the further growth of Assets

49. BS Trainig Services bsenver@superonline.com 48 CAPITAL ADEQUACY RATIO ANALYSIS CAPITAL ADEQUACY 2. Shareholders’ Equity ------------------------------------ Risk Weighted Assets

50. BS Trainig Services bsenver@superonline.com 49 CAPITAL ADEQUACY RATIO ANALYSIS CAPITAL ADEQUACY 3. Shareholders’ Equity ------------------------------------ Risk Weighted Assets + RW Contingent Liabilities

51. BS Trainig Services bsenver@superonline.com 50 CAPITAL ADEQUACY RATIO ANALYSIS CAPITAL ADEQUACY 4. Total Debt ------------------------------------ Shareholder’s Equity The ability to raise additional Debt Capital

52. BS Trainig Services bsenver@superonline.com 51 CAPITAL ADEQUACY RATIO ANALYSIS CAPITAL ADEQUACY 5. Financial Leverage : Total Assets ------------------------------------ Shareholder’s Equity

53. BS Trainig Services bsenver@superonline.com 52 CAPITAL ADEQUACY RATIO ANALYSIS CAPITAL ADEQUACY 6. Capital Formation Rate : Retained Net Income (RNI) -------------------------------------------------- Average Shareholder’s Equity RNI = Net Income - Dividends to be paid The internal growth of Equity Capital

54. BS Trainig Services bsenver@superonline.com 53 ASSETQUALITY RATIO ANALISIS ASSET QUALITY 1. Loans -------------------------------- Total Assets

55. BS Trainig Services bsenver@superonline.com 54 ASSETQUALITY RATIO ANALISIS ASSET QUALITY 2. Non Performing Loans = a) Loans past due more than 90 days b) Loans not accruing interest c) Loans with low interest rates d) Loans on which repayment terms have been renegotiated.

56. BS Trainig Services bsenver@superonline.com 55 ASSETQUALITY RATIO ANALISIS ASSET QUALITY 3. Non Performing Loans ------------------------------------- Total Loans Indicates how much of the loan portfolio is non performing.

57. BS Trainig Services bsenver@superonline.com 56 ASSETQUALITY RATIO ANALISIS ASSET QUALITY 4. Reserves for Non Performing Loans ---------------------------------------------- Non Performing Loans Indicates the ability of the loan loss reserve to absorb potential losses from currently non performing loans.

58. BS Trainig Services bsenver@superonline.com 57 ASSETQUALITY RATIO ANALISIS ASSET QUALITY 5. Loan Loss Provision ------------------------------------- Average Loans Shows current income reduction in anticipation of loan losses.

59. BS Trainig Services bsenver@superonline.com 58 ASSETQUALITY RATIO ANALISIS ASSET QUALITY 6. Net Charge - Offs ------------------------------------- Average Loans Shows current income reduction in anticipation of loan losses.

60. BS Trainig Services bsenver@superonline.com 59 ASSETQUALITY RATIO ANALISIS ASSET QUALITY 7. Interest Earning Assets ------------------------------------------------- Total Assets

61. BS Trainig Services bsenver@superonline.com 60 ASSETQUALITY RATIO ANALISIS ASSET QUALITY 8. Non Interest Earning Assets ------------------------------------------------- Total Assets

62. BS Trainig Services bsenver@superonline.com 61 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY “A Bank with no profit is like a human body with no blood.”

63. BS Trainig Services bsenver@superonline.com 62 THE PRIMACY OF EARNINGS A bank can not sustain itself long without a positive cash flow. Earnings are essential to : 1.Absorb loan losses 2.Finance internal growth of capital 3.Attract investors to supply capital

64. BS Trainig Services bsenver@superonline.com 63 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 1. Return on Assets ( ROA ) Net Income -------------------------------------------- Total Average Assets

65. BS Trainig Services bsenver@superonline.com 64 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 2. Return on Equity ( ROE ) Net Income -------------------------------------------- Average Shareholder’s Equity

66. BS Trainig Services bsenver@superonline.com 65 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 3. Return on Equity ( ROE ) ROE = ROA * Equity Multiplier ROE = ( NI / AST ) * ( AST / SHEQ )

67. BS Trainig Services bsenver@superonline.com 66 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 4. Interest Income -------------------------------------------- Average Interest Earning Assets

68. BS Trainig Services bsenver@superonline.com 67 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 5. Net Interest Income -------------------------------------------- Average Total Assets

69. BS Trainig Services bsenver@superonline.com 68 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 6. Interest Income on Loans -------------------------------------------- Average Total Loans

70. BS Trainig Services bsenver@superonline.com 69 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 7. Total Operating Expense ------------------------------------------------- Total Operating Income

71. BS Trainig Services bsenver@superonline.com 70 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 8. Efficiency Ratio Non Interest Expense ---------------------------------------------------- Net Interest Income + Fees Commissions

72. BS Trainig Services bsenver@superonline.com 71 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 9. Break Even Ratio Total Expenses - Non Interest Income ---------------------------------------------------- Total Average Interest Earning Assets

73. BS Trainig Services bsenver@superonline.com 72 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 10. Net Free Funds Ratio Non Paying Liabilities - Non Earning Assets -------------------------------------------------- Interest Earning Assets

74. BS Trainig Services bsenver@superonline.com 73 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 11. Interest Rate Sensitivity Gap : Interest Rate Sensitive Assets ( minus ) Interest Rate Sensitive Liabilities Shows the net amount to be effected by the future change of interest rates in the market

75. BS Trainig Services bsenver@superonline.com 74 EARNINGS&EFFICIENCY RATIO ANALISIS EARNINGS & EFFICIENCY 12. Interest Rate Sensitivity Gap Ratio : Interest Rate Sensitive Assets ------------------------------------------------- Interest Rate Sensitive Liabilities

76. BS Trainig Services bsenver@superonline.com 75 LIQUIDITY RATIO ANALYSIS LIQUIDITY “Inadequate Liquidity of a Bank may cause an accident similar to an airplane crash !”

77. BS Trainig Services bsenver@superonline.com 76 LIQUIDITY RATIO ANALISIS LIQUIDITY 1. Loans ------------------------- Deposits

78. BS Trainig Services bsenver@superonline.com 77 LIQUIDITY RATIO ANALISIS LIQUIDITY 2. Liquid Assets ------------------------- Deposits

79. BS Trainig Services bsenver@superonline.com 78 LIQUIDITY RATIO ANALISIS LIQUIDITY 3. Liquid Assets -------------------------------- Deposits + Borrowings

80. BS Trainig Services bsenver@superonline.com 79 LIQUIDITY RATIO ANALISIS LIQUIDITY 4. Assets Due for the Period ----------------------------------------- Liabilities Due for the Period

81. BS Trainig Services bsenver@superonline.com 80 LIQUIDITY RATIO ANALISIS LIQUIDITY 5. Net Large Liabilities ----------------------------------------- Net Earning Assets Both numerator & denominator are net of short-term assets. Measures the extent to which net earning assets would be effected by the loss of a bank’s large liabilities.

82. BS Trainig Services bsenver@superonline.com 81 LIQUIDITY RATIO ANALISIS LIQUIDITY 6. Liquid Assets ----------------------------------------- Large Liabilities Measures the assets readily available to cover a loss of large liabilities.

83. BS Trainig Services bsenver@superonline.com 82 LIQUIDITY RATIO ANALISIS LIQUIDITY 7. Core Deposits ----------------------------------------- Earning Assets Indicates the extend to which earning assets are funded by those deposits considered stable and not subject to interest rate disintermediation.

84. BS Trainig Services bsenver@superonline.com 83 LIQUIDITY RATIO ANALISIS LIQUIDITY 8. Brokered Deposits ----------------------------------------- Earning Assets Measures the extent to which a bank is funding assets with high-priced and volatile brokered deposits.

85. BS Trainig Services bsenver@superonline.com 84 MATURITY ANALISIS

86. BS Trainig Services bsenver@superonline.com 85 MATURITY ANALYSIS

87. BS Trainig Services bsenver@superonline.com 86 OFF - BALANCE SHEET RISK 1. Loan Commitments ----------------------------------------- Average Assets Shows the extent of a bank’s obligation to make loans.

88. BS Trainig Services bsenver@superonline.com 87 OFF - BALANCE SHEET RISK 2.Contingent Liabilities & Commitments ---------------------------------------------------- Average Assets Shows the extent of a bank’s commitments & contingent liabilities.

89. BS Trainig Services bsenver@superonline.com 88 BANK ANALYSIS CHECKLIST

90. BS Trainig Services bsenver@superonline.com 89 BANK ANALYSIS CHECKLIST EARNINGS 1. Is earnings at an adequate level ? 2.Does valid reporting exist for earnings?

91. BS Trainig Services bsenver@superonline.com 90 BA CHECKLIST EARNINGS IF POOR, ASCRIBABLE TO : 1. Low asset yield 2. High cost of funds 3. Inadequate non interest income 4. High loan charge off s 5. High loan loss provisions 6. Mismanaging taxes 7. High overhead costs

92. BS Trainig Services bsenver@superonline.com 91 BA CHECKLIST EARNINGS IF STRONG, ASCRIBABLE TO : 1. Strong asset yield 2. Low cost of funds 3. Adequate non - interest income 4. High loan charge off s 5. High loan loss provisions 6. Adequate taxes 7. Low overhead costs

93. BS Trainig Services bsenver@superonline.com 92 BANK ANALYSIS CHECKLIST CAPITAL ADEQUACY 1. Is level of capital high enough ? 2. Is capital growing proportionate to assets ? 3. Can additional debt be raised if needed 4. Is there pressure to pay high dividends

94. BS Trainig Services bsenver@superonline.com 93 BANK ANALYSIS CHECKLIST LIQUIDITY 1. Is bank dependent on bought money ? 2. Is this dependence traditional or recent 3. Is core deposit growth proportionate to asset growth ? 4. Is volatile funds significant to assets

95. BS Trainig Services bsenver@superonline.com 94 BANK ANALYSIS CHECKLIST ASSET QUALITY 1. Are net charge - off s reasonable ? 2. Is management slow to charge off loans 3. Is loan growth reasonable ? 4. Is loan loss reserve level adequate ? 5. Do earnings comfortably cover loan losses ?

96. BS Trainig Services bsenver@superonline.com 95 INTEREST MARGIN INCREASING THE INTEREST MARGIN %

97. BS Trainig Services bsenver@superonline.com 96 INCREASING INTEREST MARGIN Interest Income…………..200 Interest Expense…………( 50 ) ---------- INTEREST MARGIN….. 150 ----------

98. BS Trainig Services bsenver@superonline.com 97 INCREASING THE INTEREST MARGIN

99. BS Trainig Services bsenver@superonline.com 98 INCREASING THE INTEREST MARGIN BANK STRATEGY Increase Size ACTION 1.Expand Assets 2.Reduce Fixed Assets 3.Increase Equity Base

100. BS Trainig Services bsenver@superonline.com 99 INCREASE THE INTEREST MARGIN BANK STRATEGY Change Interest Spread ACTION 1.Re-Price Asset Portfolio 2.Re-Price Liability Portfolio

101. BS Trainig Services bsenver@superonline.com 100 INCREASE THE INTEREST MARGIN BANK STRATEGY Alter Asset / Liability Mix ACTION 1.Plan Taxes 2.Reduce Liquidity 3.Increase Aggressiveness 4.Change Asset Yield Sensitivity 5.Change Liability Cost Sensitivity

102. BS Trainig Services bsenver@superonline.com 101 INCREASE THE INTEREST MARGIN BANK STRATEGY Increase Size ACTION Expand Assets IMPLEMENTATION 1.Offer new Products and Services 2.New Loans/Deposits 2.Open new Branches 3.Expand Promotion Budget 4.Reduce Interest Spread

103. BS Trainig Services bsenver@superonline.com 102 EXPAND ASSETS REPERCUSSION 1.Increase operating Expenses 2.Need for Capital 3.F/A Regulations 4.Decrease Capital Ratio 5.Reduce ROA IMPLEMENTATION 1.Offer new Products and Services 2.New Loans/Deposits 3.Open new Branches 4.Expand Promotion Budget 5.Reduce Interest Spread

104. BS Trainig Services bsenver@superonline.com 103 INCREASE THE INTEREST MARGIN BANK STRATEGY Increase Size ACTION Increase Equity Base IMPLEMENTATION 1.Reduce Dividend pay out 2.Offer Dividend reinvestment 3.Sell Stock 4.Establish Employee Stock Ownership PL

105. BS Trainig Services bsenver@superonline.com 104 INCREASE EQUITY BASE REPERCUSSIONS 1.Hurt shareholders 2.Double taxation S/H 3.Reduce ability to leverage ROA, dilution of earnings 4.Continued Employee Expectations IMPLEMENTATION 1.Reduce Dividend pay out 2.Offer Dividend reinvestment 3.Sell Stock 4.Establish Employee Stock Ownership PL

106. BS Trainig Services bsenver@superonline.com 105 INCREASE INTEREST MARGIN BANK STRATEGY Change Interest Spread ACTION Re-price Portfolio IMPLEMENTATION 1.Increase rates on Loans 2.Compound return more frequently 3.Reduce rates on Deposits 4.Compound cost less frequently

107. BS Trainig Services bsenver@superonline.com 106 REPRICE PORTFOLIO REPERCUSSIONS 1.Lose business Loan quality decrease 2.Increase operations Client dissatisfaction 3.Lose business Liquidity problem 4.Increase operations Client dissatisfaction IMPLEMENTATION 1.Increase rates on Loans 2.Compound return more frequently 3.Reduce rates on Deposits 4.Compound cost less frequently

108. BS Trainig Services bsenver@superonline.com 107 INCREASE INTEREST MARGIN BANK STRATEGY Alter Asset/Liability Mix ACTION Reduce Liquidity IMPLEMENTATION 1.Minimize cash 2.Minimize due from 3.Sell Securities & Bonds 4.Increase short term Deposits

109. BS Trainig Services bsenver@superonline.com 108 REDUCELIQUIDITY REDUCE LIQUIDITY REPERCUSSION 1.Liquidity Risk 2.Lose correspondent 3.Incur book losses 4.Increase volatility of deposits IMPLEMENTATION 1.Minimize cash 2.Minimize due from 3.Sell Securities & Bonds 4.Increase short term Deposits

110. BS Trainig Services bsenver@superonline.com 109 INCREASE INTEREST MARGIN BANK STRATEGY Alter Asset/Liability Mix ACTION Increase Aggressiveness IMPLEMENTATION 1.Increase loan/deposit ratio 2.Increase highest yielding loans 3.Increase highest yielding securities

111. BS Trainig Services bsenver@superonline.com 110 INCREASE AGGRESSIVENESS REPERCUSSION 1.Increase need for capital 2.Increase loan losses 3.Increase security losses IMPLEMENTATION 1.Increase loan/deposit ratio 2.Increase highest yielding loans 3.Increase highest yielding securities

112. BS Trainig Services bsenver@superonline.com 111 INCREASE INTEREST MARGIN BANK STRATEGY Alter Asset/Liability Mix ACTION Change Asset Yield Sensitivity IMPLEMENTATION 1.Increase S/T & variable rate assets if rates will increase 2.Decrease S/T & variable rate assets if rates will decrease

113. BS Trainig Services bsenver@superonline.com 112 CHANGE ASSET YIELD SENSITIVITY REPERCUSSION 1.Wrong estimate of interest movement, thereby reducing interest spread IMPLEMENTATION 1.Increase S/T & variable rate assets if rates will increase 2.Decrease S/T & variable rate assets if rates will decrease

114. BS Trainig Services bsenver@superonline.com 113 INCREASE INTEREST MARGIN BANK STRATEGY Alter Asset/Liability Mix ACTION Change Liability Cost Sensitivity IMPLEMENTATION 1.Decrease S/T & variable rate liabilities if rates will increase 2.Increase S/T & variable rate liabilities if rates will decrease

115. BS Trainig Services bsenver@superonline.com 114 CHANGE LIABILITY COST SENSITIVITY REPERCUSSION 1.Wrong estimate of interest movement, thereby reducing interest spread IMPLEMENTATION 1.Decrease S/T & variable rate liabilities if rates will increase 2.Increase S/T & variable rate liabilities if rates will decrease

116. BS Trainig Services bsenver@superonline.com 115 CONSOLIDATED FINANCIAL STATEMENTS

117. BS Trainig Services bsenver@superonline.com 116 CONSOLIDATED BALANCE SHEET