1. Bank Financial Statements

2. Gup and Kolari: Chp. 3 Statements End Yr. 1 Qtr. 4

3. Balance Sheet Production/Financial Service FirmServices ASSETS Cash Small Cash Small Accts. Rec. Medium Investments Medium Inventory Medium Loans LARGE Fixed Assets Large Premises Small Liabs/OE Accts. Pay. Medium Deposits Large L/T Debt Large Savings Large Owner's Eq Large Other Borr’gs Medium Capital Tiny

4. Income Statement Production/ Svc.Financial Services SalesTotal Interest Income - COGS - Total Interest Expense = Gross Margin= Net Interest Income - Optg Exp + Non-Interest Income = EBIT - Non-Interest Expense - Interest Exp - Provision for Loan Losses = EBT = Pre-tax Optg Income - Tax+/- Securities Gains/Losses = Net Income - Income Taxes +/- Extraordinary Items = Net Income

5. FDIC Database of Fin’l Stmts. http://www.fdic.gov/bank/statistical/index.html Click on “Institution Directory” Click on “Find Institution” EDGARSCAN…… http://edgarscan.pwcglobal.com/servlets/edgarscan Benchmarking Assistant

6. First off…. Let’s understand what we’ve been given before we even think about where we’re going….. Let’s concentrate on the statement in your packet: Yr. 1 Qtr. 4

7. Income Statement Y1Q4 Operating Income1.41.3 Interest income Loans and mortgages87.52985.224 Securities18.51115.199 Federal funds sold0.0001.648 Total interest income106.040102.071 Service charge income4.6194.41 Fees and other income21.22421.058 Gross operating income131.882127.538

8. Income Statement Y1Q4 Operating Expenses Salaries and benefits16.77716.473 Interest expenses Interest on deposits56.84954.249 Interest on capital notes0.9090.923 FRB and fed fund borrowing1.1470.000 Total interest paid58.90555.173 Provision for loan losses7.2797.224 Occupancy expense4.0443.937 Business development3.1003.000 Other expenses22.50322.188 Total operating expenses112.608107.994

9. Income Statement Y1Q4 Gross operating income131.882127.538 Total operating expenses112.608107.994 Income before taxes and securities19.27419.545 Applicable taxes6.2686.794 Gain on securities/loans (after taxes of.349 & 1.452)0.3781.573 Net income13.38414.324 Dividend declared3.3 Increase in equity10.08411.024

10. Balance Sheet Assets1.41.3 Cash and due from banks359.254375.696 Federal funds sold0.00088.776 Investment securities Treasury bills260.000204.345 U.S. Government notes384.892320.024 State and muni securities406.290356.099 Total securities1051.182880.468

11. Balance Sheet 1.41.3 Loans and mortgages3472.5573444.479 (less provision for loan losses)22.95122.683 Bank premises less depreciation (26.030 & 24.559) 26.92126.185 Other assets10.45710.77 Total assets4897.4194803.693

12. Balance Sheet Liabilities and equities1.41.3 Demand deposits1551.7051588.917 Time deposits2951.7982883.289 Total deposits4503.5034472.206 Federal funds purchased54.9330.000 Funds borrowed from FRB0.000 Dividend payable3.300 Accrued taxes7.7919.399 Other liabilities39.57039.440 Total liabilities4609.0974524.345

13. Balance Sheet Capital notes and equity1.41.3 Capital notes38.45739.077 Common stock ($10.00 par30 Issued:3.000 & 3.000 million) Surplus48.519 Retained Earnings171.346161.752 Total equity *249.865240.271 Total liability & capital4897.4194803.693 * Total qualifying capital299.797290.689 FRB capital adequacy ratio0.9670.941

14. Analysis #1: Spread Spread = NII / Assets * 4 (Roughly) NII = 106.040 – 58.905 = 47.135 ( Net Interest Income = Total Interest Income – Total Interest Expense ) Spread = 47.135 / 4897.419 * 4 = 3.84%

15. Observations about Y1Q4 Interest income up, but expenses up more so overall net was down from Y1Q3. Quick review shows Fed Fund sales (income) became Fed Fund borrowing (expense), although there was added income from securities investment.