Question

Smallville Bank has the following balance sheet, rates earned on its assets, and rates paid on its liabilities. Rate Earned (%) Balance Sheet (in thousands) Assets Cash and due from banks $ 6, Investment securities 22,000 Repurchase agreements 12.ee Loans less allowance for losses 80, eee Fixed assets 16,eee Other earning assets 4.eee Total assets $134, eee Liabilities and Equity Demand deposits $ 9,000 NOW accounts 69, cee Retail CDs 18,000 Subordinated debentures 14.eee Total liabilities 110, eee Common stock 10,000 Paid-in capital surplus 3.ee Retained earnings Total liabilities and equity $134,000 Rate Paid (%) 11,000 If the bank earns $120,000 in noninterest income, incurs $80,000 in noninterest expenses, and pays $2,500,000 in taxes, what is its net income? (Enter your answer in dollars, not thousands of dollars.)

Answer 1

Answer:

Net Income $ 2,550,000

Working:

Interest Income Interest on Investment securities |=22,000,000*8% Interest on repurchase agreements =12,000,000*6% Interest on loans =80,000,000*10% Interest on other earning assets -4,000,000*9% Non Interest Income Total Income $ $ $ $ 1,760,000 720,000 8,000,000 360,000 $ $ $ 10,840,000 120,000 10,960,000 $ $ $ 3,450,000 1,260,000 1,120,000 Interest Exenses: Interest on NOW accounts =69,000,000*5% Interest on Retailed CDs =18,000,000*7% Interest on subordinate debentures =14,000,000*8% Non Interest Expense Income before taxes Taxes Net Income $ $ $ $ $ 5,830,000 80,000 5,050,000 2,500,000 2,550,000