Essay on Case 75: Federal Bank Solution

3035 Words Feb 20th, 2013 13 Pages
Case: 75 Federal Finance Bank – Instructor’s Solution

INPUT DATA: Amount Needed to Raise Flotation Costs Stock Offer Price Market Value/Book Value Ratio (Dollars in thousands) Assets Cash U.S. Treasuries Mortgage-backed Securities Municipal Bonds Government Agency Securities Total Cash & Securities Residential Mortgage Loans Consumer Loans Business Loans Total Loans Fixed Assets Total Assets Liabilities Passbook Savings Non-interest Checking N.O.W. Accounts Money Market Accounts Certificate of Deposits Total Savings Borrowed Money Other Liabilities Total Liabilities Capital Stock ($100 par value) Retained Earnings Total Equity Total Claims Loan Loss Reserve Allowable Risk Adjustment Weights: No default risk Low default risk Res. loans &
…show more content…
Total Number of Shares Outstanding = capital stock/par value per share = $12,155,000/$100 = 121,550 Book Value per Share = total equity/number of shares outstanding = $26,490,000/121,550 =$217.94 2. Using the data in Table 3, calculate Federal Finance’s 2000 ROA and average annual growth rate in assets from 1995 to 2000. (Hint: In your calculations, use only the data for 1995 and 2000.) ROA = Net Profit/ Total Assets = $7,863/$525,826 = 1.50% The compounded annual growth rate in assets can be found as follows: Assets1995 (1+g)5 = Assets2000 $273,617 (1+g)5 = $525,826 (1+g)5 = $525,826/273,617 = 1.92 (1+g) = 1.921/5 = 1.1396 g = 0.1396 = 13.96%. 3. For the four Bank’s listed in Table 4, calculate the following: a. The Capital Asset Ratio for 2000. b. Compound annual growth rates in assets for the five-year period 1995–2000. c. The ROA ratios in 2000. d. The market value/book value ratios for 2000. e. How does Federal Finance compare with the Capital Asset Ratios and growth rates of these institutions? a. Capital Asset Ratio = Shareholders’ equity/total assets Maryland Financial = $11,800/$220,000 = 5.36% Great Northern Bank = $23,700/$476,000 = 4.98% First Bank of California = $15,400/$305,000 = 5.05% Omaha Federal = $12,900/$238,000 = 5.42%

Case: 75 Federal Finance Bank – Instructor’s Solution

b. Assets Growth Rate = Assets1995(1+g)5=Assets2000
Open Document