Question

Determine how many bank mergers occurred in the U.S. during 2016 and 2017 If a bank has average assets of $500,000,000 and 200 full time employees, calculate the ratio for assets per employee show your work What is the primary source of non-interest expense? no on List three sources of income which contribute to non-interest income. What does NIM stand for? What is the calculation for NIM? What does ROA stand for? What does ROE stand for?

Answer 1

Answer:

Assets Per Employee: Assets Per Employee is a company's total assets over the amount of employees it has.

Formula = Total Assets / Employees.

= $500,000,000 / 200

= $2,500,000.

1. Primary source of non-interest expense:

A non-interest expense is an operating expense of a bank or financial institution that is classified separately from interest expense and provision for credit losses

Primary source of non-interest expenses or Non-interest expenses are associated with employee salaries and benefits, information technology (IT), rent, telecommunication services, taxes, professional services, marketing, amortization of intangibles, particularly for legal services to negotiate settlements for past, ongoing and future fraudulent activities by the bank and other general operating expenses.

2. Source of income which contribute to non-interest Income:

Non-interest income is bank derived primarily from fees including deposit and transaction fees, insufficient funds fees, annual fees, monthly account service charges, inactivity fees, check and deposit slip fees, and so on. Credit card issuers also charge penalty fees, including late fees and over-the-limit fees. Institutions charge fees that provide non-interest income as a way of generating revenue and ensuring liquidity in the event of increased default rates.

3. NIM: Net interest margin (NIM) is a measure of the difference between the interest income generated by banks or other financial institutions and the amount of interest paid out to their lenders (for example, deposits), relative to the amount of their (interest-earning) assets.

4. Calculation for NIM: The net interest margin formula is calculated by dividing the difference of investment income and interest expenses by the average earning assets. For example, a bank's average loans to customers was $100.00 in a year while it earned interest income of $6.00 and paid interest of $3.00. The NIM then is computed as ($6.00 – $3.00) / $100.00 = 3%. Net interest income equals the interest earned minus the interest paid out to customers.

5. ROA: Return on Assets ratio, also known as ROA. It’s the most commonly used benchmark for bank profitability since it measures the company’s return on investment in a format that is easily comparable with other institutions. ROA is a ratio of net income produced by total assets during a period of time. In other words, it measures how efficiently a company can manage its assets to produce profits.

6. ROE: Return on Equity, or ROE. This ratio is commonly used by a company’s shareholders as a measure of their return on investment. It measures the amount of a company’s income that’s returned as shareholder equity.