Castle State Bank has the following financial information. Balance Sheet Income
ID: 2712370 • Letter: C
Question
Castle State Bank has the following financial information.
Balance Sheet
Income Statement
Cash
$100
Interest Income
$400
Securities Investments
$600
Interest Expenses
($150)
Net Loans
$1200
Non-Interest Income
$50
Net Premises and Equip.
$300
Non-Interest Expenses
($100)
Total Assets
$2200
Provision for Loan Losses
($60)
Deposits
$1100
Pre Tax Net Operating Income
$140
Non-Deposit Borrowings *
$800
Securities Gains (Losses)
($40)
Equity Capital
$300
Taxes
($45)
Total Liabilities and Equity
$2200
Net Income
$55
* All Purchased Funds
Use this information to calculate Castle State Bank’s ROE
A) 20.45%
B) 18.33%
C) 12.22%
D) 7.33%
E) 2.5%
PLEASE WORK OUT
Balance Sheet
Income Statement
Cash
$100
Interest Income
$400
Securities Investments
$600
Interest Expenses
($150)
Net Loans
$1200
Non-Interest Income
$50
Net Premises and Equip.
$300
Non-Interest Expenses
($100)
Total Assets
$2200
Provision for Loan Losses
($60)
Deposits
$1100
Pre Tax Net Operating Income
$140
Non-Deposit Borrowings *
$800
Securities Gains (Losses)
($40)
Equity Capital
$300
Taxes
($45)
Total Liabilities and Equity
$2200
Net Income
$55
* All Purchased Funds
Explanation / Answer
Return on equity:
= Net income÷Equity
= $55÷$300
= 18.33%
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