The financial statements for MHM Bank (MHM) are shown below: Balance Sheet MHM B
ID: 2655855 • Letter: T
Question
The financial statements for MHM Bank (MHM) are shown below:
Balance Sheet MHM Bank
Assets
Liabilities and Equity
Cash and due from banks
$?1,920
Demand deposits
$10,620
Demand deposits at other FIs
1,100
Small time deposits
10,350
Investments
6,080
Jumbo CDs
7,670
Federal funds sold
2,990
Federal funds purchased
470
Loans (less reserve for loan losses of 2,400)
20,040
Other liabilities
2,000
Equity
3,290
Premises
2,270
????
Total
????
Total assets
$34,400
liabilities/equity
$34,400
Income Statement MHM Bank
Interest income
$4,048
Interest expense
2,024
Provision for loan losses
100
Noninterest income
700
Noninterest expense
975
Taxes
235
a. Calculate the dollar value of MHM's earning assets.
b. Calculate the dollar value of MHM's interest-bearing liabilities.
c. Calculate MHM's spread.
Assets
Liabilities and Equity
Cash and due from banks
$?1,920
Demand deposits
$10,620
Demand deposits at other FIs
1,100
Small time deposits
10,350
Investments
6,080
Jumbo CDs
7,670
Federal funds sold
2,990
Federal funds purchased
470
Loans (less reserve for loan losses of 2,400)
20,040
Other liabilities
2,000
Equity
3,290
Premises
2,270
????
Total
????
Total assets
$34,400
liabilities/equity
$34,400
Explanation / Answer
Answer to Part a.
Earning Assets = Investments + Securities + Net Loans
MHM’s Earning Assets = $6,080 + $2,990 + $20,040
MHM’s Earning Assets = $29,110
Answer to Part b.
Interest bearing Liabilities = Small Time deposits + Jumbo CDs + Federal Funds purchased
MHM’s Interest bearing Liabilities = $10,350 + $7,670 + $470
MHM’s Interest bearing Liabilities = $18,490
Answer to Part c.
Spread = (Interest Income / Earning Assets) – (Interest Expense / Interest bearing liabilities)
MHM’s Spread = (4,048 / 29,110) – (2,024 / 18,490)
MHM’s Spread = 0.139059 – 0.109465
MHM’s Spread = 0.029594 or 2.96%
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