(1) Happytown bank has the ratios given below:
a) Profit margin: 21%
b) Asset utilization: 11%
c) Equity multiplier: 12X
Compute Happytown’s ROE and ROA.
2) 2 depository institutions have compound CAMELS ratings of 1 or 2 and are “well capitalized.” Therefore, each institution falls into FDIC Risk Category deposit insurance assessment scheme. Additional, the institutions have given financial ratios and CAMELS ratings:
Insitution1 Institution 2
Tier I leverage ratio (%) 10.25 7
Loans past due 30-89
days/gross assets (%) 0.6 0.82
Nonperforming
assets/gross assets (%) 0.45 0.9
Net loan charge-offs/
gross assets (%) 0.08 0.25
Net income before
taxes/risk- weighted assets (%) 2.4 1.65
Adjusted brokered deposits ratio (%) 0 25.89
CAMELS components:
C 1 2
A 1 1
M 1 1
E 2 1
L 1 3
S 2 3
Compute initial deposit insurance assessment for each institution.