Chapter 20: Questions and Applications 1, 7, 9, and 12;
1. Interest Income- How can gross interest income rise while
the net interest margin remains somewhat stable for a particular bank?
7. Bank Leverage hat does the assets/equity ratio of a bank
9. Loan Loss Provisions-Explain why loan loss provisions of
most banks could increase in a particular period.
12. Bank Income Statement -Assume that SUNY Bank plans to
liquidate Treasury security holdings and use the proceeds for small business
loans. Explain how this strategy will affect the different income statement
items. Also identify any income statement items for which the effects of this
strategy are more difficult to estimate.
1. Assessing Bank Performance Select a bank whose income
statement data are available. Using recent income statement information about
the commercial bank, assess its performance. How does the performance of this
bank compare to the performance of other banks? Compared with the other banks
assessed in this chapter, is its return on equity higher or lower? What is the
main reason why its ROE is different from the norm? (Is it due to its interest
expenses? Its noninterest income?)
Chapter 21: Questions and Applications 1, 6, 7, 9, and 20
1. SI Sources and Uses of Funds -Explain in general terms
how savings institutions differ from commercial banks with respect to their
sources of funds and uses of funds. Discuss each source of funds for SIs. Identify
and discuss the main uses of funds for SIs.
6. Liquidity and Credit Risk- Describe the liquidity and
credit risk of savings institutions, and discuss how each is managed.
7. ARMs -What is an adjustable-rate mortgage (ARM)? Discuss
potential advantages such mortgages offer a savings institution.
9. Use of Interest Rate Swaps -Explain how savings
institutions could use interest rate swaps to reduce interest rate risk. Will SIs
that use swaps perform better or worse than those that were unhedged during a
period of declining interest rates? Explain.
20. Impact of the Credit Crisis- Explain how the credit crisis in the 2008–2009
period affected some savings institutions. Compare the causes of the credit
crisis to the causes of the SI crisis in the late 1980s.