1. Given the following information on the revenues and expenses of First Nationa

Question

1. Given the following information on the revenues and expenses of First National Bank, determine the bank’s net income after taxes for the year just concluded:

Salaries and employee benefits $ 80,000 Applicable income taxes $ 50,000
Interest on deposits 170,000 Occupancy costs 11,000
Interest on loans 320,000 Provision for loan losses 22,000
Income from U.S. Treasury sec. 75,000 Miscellaneous expenses 8,000
Extraordinary items, net -0- Interest on municipal sec. 86,000
Interest on nondeposit borrowings 30,000 Service charges on deposits 10,000
Net securities gains -0- Miscellaneous operating rev. 13,000

Explanation / Answer

We need to break these down in terms of revenues and expenses. Revenues: Interest on loans = 320,000 Income from Treasury securities = 75,000 Interest on Munis = 86,000 Service charges on deposit base = 10,000 Misc op revenue = 13,000 which is a total of = 504,000 Our expenses are: Interest on deposits = 170,000 Occupancy costs = 11,000 Provisions for loan losses = 22,000 Misc expenses = 8,000 Interest on nondeposit borrowings = 30,000 which is 241,000 Pretax income = 504,000 - 241,000 which is 263,000 less 50,000 in taxes gives us $213,000 in net income after taxes.

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