Profitability remains a challenge for banks and thrifts with less than $2 billio

Question

Profitability remains a challenge for banks and thrifts with less than $2 billion of assets. The business problem facing a bank analyst relates to the factors that affect return on assets (ROA), an indicator of how profitable a company is relative to its total assets. Data collected from a sample of 20 community banks include the ROA(%), the efficiency ratio (%), as a measure of bank productivity (the lower the efficiency ratio, the better), and total risk-based capital (%), as a measure of capital adequacy. Complete parts (a) below.

Efficiency Total Risk-Based RDA(%) 0.97 1.00 3.63 0.95 1.13 1.29 1.07 0.88 1.34 1.17 1.34 0.99 0.79 1.22 1.58 1.40 1.14 0.80 0.94 0.93 Ratio(%) 61.42 66.80 82.47 64.60 64.81 54.81 70.15 57.04 56.50 52.55 54.66 71.75 65.87 67.03 41.90 67.44 47.42 66.53 63.74 63.10 Capital(96) 12.62 12.60 11.47 13.41 15.17 19.19 16.61 13.20 28.89 13.94 14.76 18.13 12.80 15.91 17.26 18.00 17.20 16.01 18.40 18.65

Explanation / Answer

Following is the output of regression analysis:

The multiple regression model:

y' = 0.04 + 0.0211*X1 -0.0075*X2

SUMMARY OUTPUT Regression Statistics Multiple R 0.334546883 R Square 0.111921617 Adjusted R Square 0.007441807 Standard Error 0.60116714 Observations 20 ANOVA df SS MS F Significance F Regression 2 0.774287177 0.387143589 1.071227229 0.364616267 Residual 17 6.143832823 0.361401931 Total 19 6.91812 Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Intercept 0.041042907 1.291076173 0.031789687 0.975010023 -2.68288969 2.764975505 Efficiency Ratio, X1 0.021087688 0.015721459 1.341331468 0.197458759 -0.012081691 0.054257068 Total Risk based capital, X2 -0.007470339 0.037682322 -0.198245191 0.845204592 -0.086973088 0.07203241

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.