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FIRST LOOK AT YOUR BHC’S FINANCIAL STATEMENTS
In Chapter 5, we focus most heavily on the financial statements for banking companies. As you read this chapter, you progress through a lengthy, yet interesting, discussion of the items found on the Report of Condition (balance sheet) and the Report of Income (income statement). In the chapter you find financial statements providing dollar amounts and then comparative financial statements where the ratios of items-to-assets are presented. The data was collected from Statistics for Deposi tory Institutions at the FDIC’s Web site (www4.fdic.gov/sdi/) and organized into tables using Excel. You will first create financial statements using dollar figures collected from SDI for your banking company for year-to-year comparisons, and you will then create financial statements for your banking company and its Peer Group using the ratios of items-to-assets.
A. Add a spread sheet entitled “year-to-year Comparisons” to your Excel workbook. Enter the data for your BHC in the format illustrated for BB&T.
To fill in the dollar amounts for the Year-to-Year Comparisons spread sheet, go to www4.fdic.gov/sdi and enter SDI. You will create a report with two columns and you are presented with two pull-down menus. From the first pull-down menu, select “Bank Holding Company,” then enter your company’s BHC number and select the report date for the most recent year-end. From the second pull-down menu, repeat the process, only you will select reports for December, one year prior. Follow the cues to generate a report selecting to “View” in “Dollars” for the first spread sheet. For the Report of Condition you will be able to enter most data directly from the Assets and Liabilities report generated at the FDIC Web site; however, you will have to explore the Net Loans and Leases link to get Gross Loans and Leases and Unearned Income. For the Report of Income, you will find the information you need in the section called “Income and Expense.”
B. Create a second worksheet in the same workbook, but collect data in “Percent of Assets” rather than in dollars. This will be useful for comparative analysis,
and you will connect data both for your BHC and a group of peer banks. To fill in the percentages of total assets, return to www4.fdic.gov/sdi and enter SDI. This time, you will create a report with four columns and you are presented with four pull-down menus. From the first pulldown menu, select “Bank Holding Company,” then enter your company’s BHC number and select the report date for the most recent year-end. From the second pull-down menu, choose “Standard Peer Group” and select “All Commercial Banks with assets greater than 10 Billion” for the most recent year-end. You will repeat this process using the last two pull-down menus, only you will select reports for December, one year prior. Follow the cues to generate a report selecting to “View” in “Percent of Assets” and enter the same items as in Part A. By working with these statements, you will be familiarizing yourself with real-world financial statements and developing the language to talk with finance professionals from all types of financial institutions.
C. To develop an understanding of the relationships on the Reports of Condition and Income and to double-check for data collection errors, we will use our formula functions to calculate total assets, total liabilities and capital, total liabilities, total equity capital, net interest income, pretax net operating income, income before extraordinary items, and net income, using the spreadsheet developed in Part A. First Step: copy Columns B and C to Columns D and E. Second Step: clear the values in the cells containing total assets (i.e., Cells D4 and E4), total liabilities and capital, total liabilities, total equity capital, net interest income, pretax net operating income, income before extraordinary items, and net income. Then use the formula functions in Excel to create entries for the empty cells. For example, the formula for total liabilities used in Column D would be SUM(B20:B25). If the formulas and entries are correct, you will get the same numerical values as in columns B and C, and you can be reassured that you are developing an understanding of the financial statements of banks and similar financial firms.