Case 75: Federal Bank Solution
Case: 75 Federal Finance Bank – Instructor’s Solution
INPUT DATA: Amount Needed to Raise Flotation Costs Stock Offer Price Market Value/Book Value Ratio (Dollars in thousands) Assets Cash U.S. Treasuries Mortgage-backed Securities Municipal Bonds Government Agency Securities Total Cash & Securities Residential Mortgage Loans Consumer Loans Business Loans Total Loans Fixed Assets Total Assets Liabilities Passbook Savings Non-interest Checking N.O.W. Accounts Money Market Accounts Certificate of Deposits Total Savings Borrowed Money Other Liabilities Total Liabilities Capital Stock ($100 par value) Retained Earnings Total Equity Total Claims Loan Loss Reserve Allowable Risk Adjustment Weights: No default risk Low default risk Res. loans & muni. bonds Other assets
OUTPUT DATA: $8,000,000 13.28% $20.00 1.15 Return on Assets 1.50% Original Share Price $250.63 # shares to raise capital (@$20) 461,255 Net per share $17.34 Capital Asset Ratio 5.04% Risk Based Capital Asset Ratio 10.64% Annual Growth in Assets 13.96%
7,387 12,477 110,684 25,970 34,740 $191,258 $189,164 36,583 77,693 $303,440 $ 31,128 $525,826
$
$ 58,693 10,654 36,581 115,268 185,561 $406,757 $ 68,701 23,878 $499,336 $ 12,155 14,335 $ 26,490 $525,826 $ 2,680
0% 20% 50% 100%
(Table continued)
Case: 75 Federal Finance Bank – Instructor’s Solution
YEAR 2000 1999 1998 1997 1996 1995
NET PROFIT (THOUSANDS) $7,863 $6,732 $5,959 $5,450 $4,745 $4,077
ASSETS (THOUSANDS) $525,826 $461,119 $402,667 $360,954 $312,172 $273,617
Data on Publicly Traded Banks:
ASSETS (1,000) EQUITY (1,000) BOOK VALUE PER SHARE PRICE NET PROFIT ASSETS 1995 (1,000) (1,000)
Maryland Financial Great Northern Bank First Bank of California Omaha Federal
$220,000 476,000 305,000 238,000
$11,800 23,700 15,400 12,900
$31.35 21.08 40.56 25.75
$34.68 20.84 36.54 30.36
$3,322 6,172 2,745 3,546
$109,400 241,600 239,000 123,609
OWNER Brown Zudlum Jones Others
PERCENT OWNED 33% 31 20 16
INPUT DATA: Amount Needed to Raise Flotation Costs Stock Offer Price Market Value/Book Value Ratio (Dollars in thousands) Assets Cash U.S. Treasuries Mortgage-backed Securities Municipal Bonds Government Agency Securities Total Cash & Securities Residential Mortgage Loans Consumer Loans Business Loans Total Loans Fixed Assets Total Assets Liabilities Passbook Savings Non-interest Checking N.O.W. Accounts Money Market Accounts Certificate of Deposits Total Savings Borrowed Money Other Liabilities Total Liabilities Capital Stock ($100 par value) Retained Earnings Total Equity Total Claims Loan Loss Reserve Allowable Risk Adjustment Weights: No default risk Low default risk Res. loans & muni. bonds Other assets
OUTPUT DATA: $8,000,000 13.28% $20.00 1.15 Return on Assets 1.50% Original Share Price $250.63 # shares to raise capital (@$20) 461,255 Net per share $17.34 Capital Asset Ratio 5.04% Risk Based Capital Asset Ratio 10.64% Annual Growth in Assets 13.96%
7,387 12,477 110,684 25,970 34,740 $191,258 $189,164 36,583 77,693 $303,440 $ 31,128 $525,826
$
$ 58,693 10,654 36,581 115,268 185,561 $406,757 $ 68,701 23,878 $499,336 $ 12,155 14,335 $ 26,490 $525,826 $ 2,680
0% 20% 50% 100%
(Table continued)
Case: 75 Federal Finance Bank – Instructor’s Solution
YEAR 2000 1999 1998 1997 1996 1995
NET PROFIT (THOUSANDS) $7,863 $6,732 $5,959 $5,450 $4,745 $4,077
ASSETS (THOUSANDS) $525,826 $461,119 $402,667 $360,954 $312,172 $273,617
Data on Publicly Traded Banks:
ASSETS (1,000) EQUITY (1,000) BOOK VALUE PER SHARE PRICE NET PROFIT ASSETS 1995 (1,000) (1,000)
Maryland Financial Great Northern Bank First Bank of California Omaha Federal
$220,000 476,000 305,000 238,000
$11,800 23,700 15,400 12,900
$31.35 21.08 40.56 25.75
$34.68 20.84 36.54 30.36
$3,322 6,172 2,745 3,546
$109,400 241,600 239,000 123,609
OWNER Brown Zudlum Jones Others
PERCENT OWNED 33% 31 20 16