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by: Corine Gibson


Corine Gibson
Texas State
GPA 3.75


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Class Notes
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This 37 page Class Notes was uploaded by Corine Gibson on Wednesday September 23, 2015. The Class Notes belongs to FIN 4380D at Texas State University taught by Staff in Fall. Since its upload, it has received 36 views. For similar materials see /class/212743/fin-4380d-texas-state-university in Finance at Texas State University.


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Date Created: 09/23/15
BankCEO 41 2 Results Operating Earningsl Net Income FFS or FFPI Avg Total Assets Rank Avg Equity Rank Total Capital Irving MSJ 056 5 785 6 9118 United Bobcat Bank 4 14 2 I 41497 439 7 272 NaNDayFmandal 061 4 7 7979 o4 11 2133 172 009 12 11 21473 Prime Time First National Bank 100 I j 0 00 SoggyBo omsBank 034 7 9 546 MBBS Financial Bank 049 939quot I 1 0 00 HnanchlUnHed 002 10 12 000 Show Me the Money and Trust 016 135 if A 4i i k 68 193 Bank Redemption 053 14 596 15 192 29 Hays County Bank 3901 62r 15 l i 39 390 100 Penny Pincher 120 1 1550 3 000 Little Big Bank 047 a 81 4449 PngBank 022 8 384 10 22426 Rank 4162009 Total Capital Stock Risk Adj Assets Rank Price Ranki Irving MSJ United Bobcat Bank New Day Financial Prime Time First National Bank Soggy Bottoms Bank MBBS Financial Bank Financial United Show Me the Money and Trust Bank Redemption Hays County Bank Penny Pincher Little Big Bank Piggy Bank 754 11 3995 9 g i3 7 901 3 3984 10 162 1301 l 796 8 5237 1 7554 quot1T1 661 15 3367 15 Penny Pincher United Bobcat Bank Prime Time First National Bank New Day Financial Soggy Bottoms Bank Hays County Bank MBBS Financial Bank Financial United Little Big Bank Irving MSJ Redemption Bank Piggy Bank Show Me the Money and Trust 4162009 4162009 Overall iOVerall Sicore Rank A2 United Bobcat Bank 58 2 263 1 A3 New Day Financial 139 7 gt C3 Penny Pincher B2 Soggy Bottoms Bank s 1 B1 Prime Time First National Bank 58 2 178 5 C1 Redemption Bank 7 5 C2 Hays County Bank C4 Little Big Bank A1 Irving MSJ B4 Financial United A5 A4 B3 MBBS Financial Bank 42 7 113 13 C5 Piggy Bank BS Show Me the Money and Trust 3916 15 87 15 Potential Concerns gt Minimum Total CapitalRisk Based Assets Found on 3550 Page 30 o If your bank has fallen below the minimum of 7 you have this quarter to increase it Everyone did much better gt FFP to Total Capital 0 If your bank has a FFPTotal Capital Ratio of over 100 you need to get this below 100 All but 1 bank is in compliance Restrictions gt Dividends 0 Maximum increase is 100 gt Loan Loss Provision 0 May not be less than 750000 without permission of the regulator that s me Interest Rates gt The discount rate will rise by approximately 50 basis points 050 4162009 4162009 Questions BANK CEO I Balance Sheet B001 Assets a Cash amp Cash Items a Federal Funds Sold u InvestmentSecurities u Loans u Premises D Other Assets Balance Sheet B001 l Liabilities amp Equity u DDABusiness Public amp Individual m Now Savings amp Money Market a Time Deposits u Borrowed Funds Other Liabilities Long Term Debt u Subordinated Debt u Owner s Equity 1 n Income Statement B002 Total Interest Income Total Interest Expense Net Interest On Swaps Net Interest Income Income Statement B002 Fees amp Service Charges Other Income Loan Loss Provision Operating txpenses Operating Earnings GainsLosses Income Taxes Net Income l Community Balance Sheets 8021 l Community Income Statements 8022 I Competitor Information I Managed Accounts l Investments u T Bills BL u Strips ST u T Bonds BD a Bank Quali ed Munis TX a Tax Free No New Investments u MortgageBackedMB u Fed Funds Soldquot Nondiscretionary Managed Accounts l Commercial Loans a Credit Lines amp Term Loans In Each Of3 Different Markets National Corporate Middle Market Small Business a International Trade Loans I Managed Accounts l Real Estate Loans a Construction a Commercial u Multifamily a 14 Family Fixed amp Variable Rate a Home Equity I Managed Accounts l Consumer Loans a Personal a Credit Card u Installment Managed Accounts Deposits u Checking Business Public amp Individual m Now Accounts u Savings Deposits a Money Market Accounts a Retail Certificates Time Deposits I Managed Accounts I Purchased Funds u u u u a Federal Reserve Bank Borrowing Certificates Of Deposit Public Time Deposits Housing Finance Bank Borrowing Repos amp Fed Funds Purchasedquot I Nondiscretionary I Capital a u Subordinated Debt Common Stock Issues lBa l0 l1 l2 nk CEO Output 00 099 Balance Sheet amp Income Stmts 00 199 Security Investments 00 299 Loan Activity amp Markets I 400 499 Deposit Composition amp Markets I 500 599 Purchased Funds amp Capital I 600 699 General Administration Info I 900 999 General Economic Info Bank CEO Output 8 102 Security Portfolio i l mm l mam l l i u l was i mm l mu m l n m l i Im mu I Securities Decisions T Bills BL u Maturities OH 2 3 or 4 quarters u Purchased on a discount basis I Strips ST discount 1120 qtrs T Bonds BD u Maturities OH to 120 quarters a Purchase at face value par only I Both TBills amp TBonds can be used to su borrowin thru re urchase a reements Repo s and be pledged against public deposits Strips cannot be used for these purposes Securities Decisions I Government Agencies AG u Purchased at Par u 8 Qtr maturities callable a er 4 qtrs I State amp Local Bonds TE a Default free a Taxexempt income cost to carry a Maturities OH to 120 quarters Securities Decisions I All Securities u Maximum Purchase of 99 million a GainsLosses are ordinary incomeexpense u Maximum of 40 securities held a Purchases amp Sales in whole 35 millions I Bank CEO Output l B 202 Loan Activity I Pricing Decisions l Wholesale Markets a Bank cannot set price on product a Products are standardized and high volume a Interest rate risk is managed by buying desirable products amp selling undesirable ones I Pricing Decisions l Retail Markets a Price can be negotiated with customer a Bank can set prices so can competitors u Products are not standardized u Pricing used to attract desirable productscustomers amp turn away undesirable ones Loan Pricing Matrix Spread From Market Business Development Change In Balance or Credit Policy New Loans I Bank CEO Output Deposit Activity I B401 I B421 Retail Certificates 10 I Bank Pricing Principles I Pricing is used to separate rate sensitive from nonrate sensitive customers I Pricing decisions should be based on marginal not average profitability I Price Change Decision I Transaction Deposits a Rising rate environment a Assume 10 of deposits are rate sensitive Interest Balance Rate Expense Current 10000 60 600 Price Change Decision I What If Scenarios Interest Balance Rate Expense 1 10000 65 650 2 9 000 6 0 540 Difference 1000 110 Marginal Cost Of Retaining 1000 Balance 1101000 11 Rate Sensitive 1 000 65 65 Non Rate Sensitive 9000 05 Q5 TOTAL 110 I Price Change Decision I Time Deposits a Rising rate environment a Assume 30 of deposits are rate sensitive Interest Balance Rate Expense Current 10000 70 700 I Price Change Decision I What If Scenarios Interest Balance Rate Expense 1 10000 75 750 2 7 ooo U Vn 5 Difference 3000 260 Marginal Cost Of Retaining 3000 Balance 260l3000 87 39tive 22 Rate Sensi Non Rate Sensi ive 7000 05 35 TOTAL 260 Business Development I Allocate Salaries I Allocate Advertising amp Promotion Expense u The amounts you budget are in 000s and are for the quarter not annualize u Decide which product types respond to business development efforts and which don t u A 0 value for business development salaries will shut down the solicitation ofnew business amp customers by the bank s staff I Purchased Funds amp Capital Decisions I REPOS u Require 100 collateralization by US Treasury securities a Rate aid is usuallr best short term rate a Actual rate for quarter is average of beginning amp ending repo rate a All repo s run off at endof quarter I Purchased Funds amp Capital Decisions I OPEN MARKET CDS u lnitial maturities are 123 or 4 quarters u Enter amounts in whole 35 millions u Issues limited by amounts available a Maximum amount is a function of I Bank size I Past issues restrictive I Market s risk assessment of the bank a No early redemption Bank CEO Output l B 501 Purchased Funds Summary I B 502 Housing Finance Borrowing l Purchased Funds amp Capital Decisions I Capital NotesSubordinated Debt a All have initial maturity of 60 quarters a Select only one of the 3 amounts available a Rate are given and are based on market conditions and the credit rating of the bank I Common Stock a Select only one of the 3 amounts available a Receive full proceeds re ected in the stock prices given I DON T DO BOTH AT THE SAME TIME I Purchased Funds amp Capital Decisions Rememberthat there is a 1 quarter lag between a decision to either issue or redeem capital stock and actually doing it u Declare intentions in Qtr1 u Action occurs during Qtr 2 I Bank CEO Output l B 550 Common Stock Price and Capital Adequacy for All Banks in Community u u u u Forms For Decision Inputs D 010 D 030 D 040 D 050 D 060 Purchase amp Sell Securities Loan Decisions Loan Sales Decisions General Credit Administration Deposit Decisions Purchased Funds amp Capital Decisions General Administration Decisions I Purchase Securities Page 1 Purchase Securities Page 1 I Look at Reports B102 and B104 i i i mm i mam i i i n m 77777777 n i mm i my i mm i mu m i n m i i W 4 i mam im WW mum i mum Loan Decisions Page 2 I Look at Reports 8900 and 8901 to forecast Where rates will be next quarter Loan Decisions Page 2 a Note I The Base Interest Rate is the rate charged to your 1 amp2 customers Your Maximum Interest Rate is the rate charged to your 6 customers D The rate reported on E3210 r5 the average of these tWO rates D The rate charged 3 4 and 5 customers r5 prorated between these tWO rates 5 000 5 125 5 250 5 375 5 500 Mortgage Banking Page 3 I Credit Administration Decisions Page 4 Maximum Outstanding in Look at the current balance for the accounts and then set this values Consider them a safety valve in case you are wildly successful Read that as Oops I mispriced that product I Credit Administration Decisions Page 4 I Cannot reduce ifALL is less than 1 of Loans net in General Credit Policy I Demand Deposits Page 5 I Demand Deposits Page 5 Look at the Treasury rates in 8900 and 8901 in setting your Retail Certificate rates lDemand Deposits Page 5 I Look on B450 20 iTreasury Decisions Page 6 u Dividends Per Share Enter quarterly dividend in per share cents really Prior quarter s decision carried over if no decision NEVER REDUCE DIVIDENDS u Forecasted Eamlngs Per Share Enter in to 2 decimal places Prior quarter s decision carried over if no decision I Used by investors to evaluate he ability of bank management iTreasury Decisions Page 6 W W hm m ix 5 mum W W hm cm PM 555m 21 lGeneral Administration Decisions Page 7 I Use Report B600 I That Finishes The Review Of The Basic Information You Have For BankCEO I Now For Some Crucial Miscellaneous Information 22 I Bank CEO Output l B 900 amp 901 National Market Rates amp Economic Indicators 23 I Cash Management lst Day I On The First Day Of Quarter u In ows I Maturing securities I Sales ofloans and securities Reversal of fed funds sold at prior quarter Funds purchased FRB CDs PTB amp HFB debt I Capital security issues I Cash Management lst Day I On The First Day Of Quarter u Out ows I Purchases ofsecurities I Reversal of funds purchased borrowed I Maturinglong term debt I Dividends amp Stock Repurchases Cash Management lst Day I Net Inflow invested in Fed Funds sold I Net Outflowfinanced through repos and purchases of fed funds 24 I Cash Management Quarter I During Quarter u In ows I Deposits attracted I Loans matured u Out ows I Deposit runoff I Loans booked I FUNDS POSITION FOR THE QUARTER IS THE SUM OF FLOWS DURING QUARTER PLUS 1ST DAY POSITION I Examples OfA Bad Strategy I Market rate on credit line is 95 You opt for an 80 rate to gain market share I Loosen credit policy from 1 to 6 to capture market share I Increase business development expense to promote growth I Lower rates on savings by 40 to improve net interest margin I Cap credit line growth at 5 million I Other Reports I These will likely be used by specific team members in the performance of their assignments 25 I Scheduled Loan Maturities B204 Loan Credit Quality B205 New Loan Credit Quality B206 Mu Wm M 1 M11 26 Community Loan Information B210 Retail Certi cates 7 Matu ng Amounts amp 28 I BankCEO Gameplan I Assign various tasks to individual team members Don t try to do all tasks as a group I Bank CEO Gameplan I Look at ending position from prior quarter What worked What didn t work7 I Inspect pricingpro tability from last quarter Check regulatoryviolations Inspect competition s performance I What do you want to do with the balance sheet in the coming quarter I Develop pricing marketing credit strategies to reshape the balance sheet to accomplish 3 above Remember to account for runoff amp maturities I Achieve an appropriate level of pro tability Basic Steps for BankCEO Success I Take your current balance sheet and identify What s rolling off I Identify What you want BOTH SIDES of your balance sheet to look like for next quarter I See Where rates in the national economy have gone since the last quarter I Look at pricing in your community and devise a successful pricing strategy 29 Basic Steps for BankCEO Success I Make sure that your interest rates service charges credit policies and business development expenses all work together I Look for Opportunities I Make sure you are operating safely I Focus on a Loan Pricing u Deposit Pricing u Understanding the Massive Amount of Information You Have amp Receive I N2111ng Your Bank I Maximum of 32 characters I Be creative amp humorous but in good taste Rememberthere is a line that should not be crossed l BankCEO I REMEMBER It s a GAME a computer model Not the real world quot Igt 30 I Bragging Rightsllll l Five Criteria a Return on Assets before gainslosses Opera ing EarningsAverage Total Assets 4 a Return on Equity a er gainslosses Net lncomdAverage Equity 4 u FFS or FFPTotal Capital FFS or FFPlTotal Capital FFP should not exceed Total Capital a Total CapitalRisk Assets a Stock Price I Bragging Rightsllll Scoring u Example Stock Score Cnmmuni39y sm ck sm ck Bank Bank Name Price Scare Xi Luyaily Bank 73 U2 x2 Chuice m an x3 Hill Cuunlvy Financial 75 28 X4 Naliunal State Bank ulSan Marcus 52 n7 Vi Bank R ul 54 37 v2 Lune Star Bank 58 71 v3 Suulh Paci c Elite Risk Management 5184 l Bragging Rightsllll Scoring u Your bank s score for each decision is the sum of the five criteria scores a Final Overall Score is the TOTAL ofthe three decision scores Grading a You will receive a grade for each decision Your grade will be based on your score for that decision 31 Shareholder Presentations l End of Semester Presentation a Make sure it answers the following questions What are your greatest accomplishments What did notwork How did you react to competition What shape are you leaving the bank in Assign CAMELS rating Shareholder Presentations l End of Semester Presentation a You choose format Humor is allowed but make sure you answer the above a Be re ared for uestionsfrom our shareholders u Presentations should last about 5 minutes GOOD LUCK QU ESTI ONS


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