Martin Cole, an examiner at the Federal Reserve Bank of Cleveland, conducted a financial analysis of Comerica Bank for his Stonier Graduate School of Banking extension project. Comerica reported total assets of $65.7 billion as of March 31, 2014. Cole analyzed Comerica's financial performance over the last four quarters based on its Uniform Bank Performance Report and annual report. He found that Comerica's return on assets, efficiency ratio, and net interest margin lagged peer averages, though its levels of non-performing loans were below peers and declining. Cole attributed Comerica's financial performance primarily to low interest rates earned on loans, which dominate its portfolio.
JPMorgan Chase reported third quarter 2010 net income of $4.4 billion, up 23% from the third quarter of 2009. Revenue was $24.3 billion. The Investment Bank reported solid earnings and maintained its #1 ranking for global investment banking fees and global debt/equity. Retail Financial Services had strong mortgage production and continued branch expansion. Card Services saw increased sales volume and improved credit trends. Commercial Banking reported record revenue. Asset Management had $38 billion in net inflows. Credit costs declined but mortgage and credit card losses remained high. The Firm's capital and credit reserves remained strong.
1Q 2013 Consolidated Earnings PresentationGaranti Bank
This document provides a 3-month earnings presentation for BRSA Consolidated. Some key points:
- In the first quarter of 2013, BRSA saw a 39% year-over-year increase in comparable net profit due to improving core banking revenues and efficient cost management. Return on equity was 24% and return on assets was 2.9%.
- BRSA maintained a customer-oriented and liquid asset mix, with loans making up 55% of total assets. Retail loans saw strong growth, particularly in mortgages, auto loans, and general purpose loans.
- BRSA pursued a selective lending strategy focused on profitability, with above-sector growth in Turkish Lira lending and a diversified funding
This document discusses the importance of controlling operating expenses to ensure profitability on loans. It provides the following key points:
1) While interest margins have widened as rates have fallen, operating costs as a percentage of assets have risen for mortgage, consumer, and credit card loans.
2) Calculating accurate loan origination and maintenance costs is important for properly pricing loans. Formulas are provided to determine these per-loan costs based on department costs and time spent on origination vs maintenance.
3) Controlling costs, such as by requiring electronic payments, can significantly increase returns on auto loans compared to simply raising rates or fees. Reducing costs preserves competitive positioning versus competitors who rely on price increases.
The document discusses forward-looking statements that STRH Unconference makes regarding future levels of economic activity, loan growth, deposit trends, credit quality trends, and other projections. It notes that actual results and performance could differ materially from forward-looking statements. The document also includes a disclaimer that STRH undertakes no obligation to update or revise any forward-looking statements.
Fifth Third Bancorp reported lower third quarter earnings per share of $0.71 compared to $0.83 in the previous year due to contraction in net interest margin from aggressive increases in deposit pricing and lower than expected deposit growth. Loan growth remained strong across all categories but was offset by challenges in growing deposits sufficiently. Credit quality remained stable with nonperforming assets and net charge-offs at low levels.
United Community Banks reported a net operating loss of $32 million for Q1 2009, driven by a $65 million provision for loan losses and a $22 million increase in allowance for loan losses. The company also reported a $70 million non-cash goodwill impairment charge and $2.9 million in severance costs. Total net loss was $103.8 million. Credit quality continued to deteriorate due to weakness in Atlanta housing and construction markets, with non-performing assets up to $334.5 million. However, net interest margin improved to 3.08% due to actions to improve loan pricing and reduce deposit costs.
CFA Institute Research Challenge Sterling Financial Corporation (STSA) resear...RyanMHolcomb
Sterling Financial Corporation is a regional bank headquartered in Washington state that was heavily impacted by the financial crisis but has since recovered through recapitalization efforts. The report recommends holding Sterling stock with a price target of $19.46, a 5% increase, citing improving financial trends, a diversified loan portfolio, and growth strategies around loan originations and acquisitions. However, risks remain from economic uncertainty and interest rate pressures on margins.
JPMorgan Chase reported first quarter 2009 net income of $2.1 billion, down from $2.4 billion in the first quarter of 2008. Revenue was a record $26.9 billion driven by strong performance in the Investment Bank. The Investment Bank generated record revenue and net income due to #1 rankings in debt and equity underwriting. Retail Financial Services income was $474 million, improved from a loss the prior year, due to the Washington Mutual acquisition partially offset by higher credit costs. Credit costs increased across portfolios as housing prices declined and delinquencies rose. The company remains well capitalized with a Tier 1 capital ratio of 11.3% and loan loss reserves of $28 billion to withstand
JPMorgan Chase reported third quarter 2010 net income of $4.4 billion, up 23% from the third quarter of 2009. Revenue was $24.3 billion. The Investment Bank reported solid earnings and maintained its #1 ranking for global investment banking fees and global debt/equity. Retail Financial Services had strong mortgage production and continued branch expansion. Card Services saw increased sales volume and improved credit trends. Commercial Banking reported record revenue. Asset Management had $38 billion in net inflows. Credit costs declined but mortgage and credit card losses remained high. The Firm's capital and credit reserves remained strong.
1Q 2013 Consolidated Earnings PresentationGaranti Bank
This document provides a 3-month earnings presentation for BRSA Consolidated. Some key points:
- In the first quarter of 2013, BRSA saw a 39% year-over-year increase in comparable net profit due to improving core banking revenues and efficient cost management. Return on equity was 24% and return on assets was 2.9%.
- BRSA maintained a customer-oriented and liquid asset mix, with loans making up 55% of total assets. Retail loans saw strong growth, particularly in mortgages, auto loans, and general purpose loans.
- BRSA pursued a selective lending strategy focused on profitability, with above-sector growth in Turkish Lira lending and a diversified funding
This document discusses the importance of controlling operating expenses to ensure profitability on loans. It provides the following key points:
1) While interest margins have widened as rates have fallen, operating costs as a percentage of assets have risen for mortgage, consumer, and credit card loans.
2) Calculating accurate loan origination and maintenance costs is important for properly pricing loans. Formulas are provided to determine these per-loan costs based on department costs and time spent on origination vs maintenance.
3) Controlling costs, such as by requiring electronic payments, can significantly increase returns on auto loans compared to simply raising rates or fees. Reducing costs preserves competitive positioning versus competitors who rely on price increases.
The document discusses forward-looking statements that STRH Unconference makes regarding future levels of economic activity, loan growth, deposit trends, credit quality trends, and other projections. It notes that actual results and performance could differ materially from forward-looking statements. The document also includes a disclaimer that STRH undertakes no obligation to update or revise any forward-looking statements.
Fifth Third Bancorp reported lower third quarter earnings per share of $0.71 compared to $0.83 in the previous year due to contraction in net interest margin from aggressive increases in deposit pricing and lower than expected deposit growth. Loan growth remained strong across all categories but was offset by challenges in growing deposits sufficiently. Credit quality remained stable with nonperforming assets and net charge-offs at low levels.
United Community Banks reported a net operating loss of $32 million for Q1 2009, driven by a $65 million provision for loan losses and a $22 million increase in allowance for loan losses. The company also reported a $70 million non-cash goodwill impairment charge and $2.9 million in severance costs. Total net loss was $103.8 million. Credit quality continued to deteriorate due to weakness in Atlanta housing and construction markets, with non-performing assets up to $334.5 million. However, net interest margin improved to 3.08% due to actions to improve loan pricing and reduce deposit costs.
CFA Institute Research Challenge Sterling Financial Corporation (STSA) resear...RyanMHolcomb
Sterling Financial Corporation is a regional bank headquartered in Washington state that was heavily impacted by the financial crisis but has since recovered through recapitalization efforts. The report recommends holding Sterling stock with a price target of $19.46, a 5% increase, citing improving financial trends, a diversified loan portfolio, and growth strategies around loan originations and acquisitions. However, risks remain from economic uncertainty and interest rate pressures on margins.
JPMorgan Chase reported first quarter 2009 net income of $2.1 billion, down from $2.4 billion in the first quarter of 2008. Revenue was a record $26.9 billion driven by strong performance in the Investment Bank. The Investment Bank generated record revenue and net income due to #1 rankings in debt and equity underwriting. Retail Financial Services income was $474 million, improved from a loss the prior year, due to the Washington Mutual acquisition partially offset by higher credit costs. Credit costs increased across portfolios as housing prices declined and delinquencies rose. The company remains well capitalized with a Tier 1 capital ratio of 11.3% and loan loss reserves of $28 billion to withstand
Gulf South Bank held a conference on May 13, 2013. The presentation included the following key points:
- Gulf South Bank has a diversified footprint across the Gulf South with two well-known brands and a loyal customer base.
- Recent acquisitions have created a premier Gulf South financial services franchise with leading market share in key regions.
- Asset quality metrics improved compared to prior quarters, with nonperforming assets decreasing.
- Earnings remained solid compared to peers, though net interest margin was impacted by lower earning asset yields. Expense reductions are planned to offset this impact over time.
- Capital levels remain strong and excess capital will be deployed through a stock repurchase program.
Sterling Bancorp reported financial results for full year and fourth quarter 2009. Net income for 2009 was $9.4 million, down from $16 million in 2008, due to a higher provision for loan losses and increased expenses, which offset higher net interest income and noninterest income. For the fourth quarter, net income was $2.6 million, down from $4 million a year ago. Sterling's pre-tax, pre-provision income rose 26% for the full year and 29% for the fourth quarter, driven by loan and deposit growth, increased noninterest income, and expense management. Credit quality improved as nonaccrual loans decreased in the third and fourth quarters.
JPMorgan Chase First Quarter 2008 Financial Results Conference Call finance2
JPMorgan Chase reported net income of $2.4 billion for the first quarter of 2008, down 49% from $4.8 billion in the first quarter of 2007. Earnings per share were $0.68, down from $1.34 the previous year. The Investment Bank saw declines in revenue and increases in credit losses. Retail Financial Services increased revenue but also significantly increased its provision for credit losses due to deterioration in home equity and subprime portfolios. JPMorgan Chase maintained a strong capital position despite challenges in the market and credit environment.
JPMorgan Chase reported third quarter 2011 net income of $4.3 billion, down slightly from $4.4 billion in third quarter 2010. Revenue decreased due to challenging market conditions impacting the Investment Bank. The firm maintained its #1 ranking for Global Investment Banking Fees year-to-date. Consumer & Business Banking reported higher revenues and deposits compared to a year ago. Credit quality improved with lower credit card and wholesale credit losses, while mortgage losses remained elevated. The firm repurchased $4.4 billion in stock and estimated its Basel III Tier 1 ratio was 7.7% at the end of the third quarter.
This document provides an investment summary and recommendation on Zions Bancorporation (ZION). It issues a HOLD recommendation with a target price of $43.18, representing a 1% upside from the current price of $43.04. The summary cites factors such as ZION's efforts to reduce risky loans and focus on fee income through asset management as reasons for its strong performance. However, the current price has likely priced in the positive outlook, so only modest upside is expected. Limited downside risks exist due to an improving regulatory and interest rate environment.
Compared to equities, bonds at first glance can appear like a throwback to your grandparent's days, but this month we take a look at how bonds may help mitigate risk, and the role they play in a well-diversified portfolio.
FIS Research - High Performance Community BankingPaul McAdam
Historically, economies of scale have provided larger financial institutions with the ability to generate lower efficiency ratios and, often, higher returns on assets than community banks. Despite the disadvantages of their smaller size, some community banks outperform larger banks as well as their community bank peers during both good and bad times. This research brief focuses on the financial metrics of high-performing community banks to determine the characteristics that differentiate the elite performers from the rest of the pack.
Regency Centers Trust is a retail REIT that focuses on generating cash from operations and continually growing that ability. The report analyzes Regency's ability to raise cash, growth potential given the retail industry environment, current economy impacts, interest rate risk, investment positives like relationships with major retailers, and investment risks around areas weak to economic changes and reliance on major tenants. It also summarizes Regency's balance sheet, capital structure, debt obligations, liquidity, net income trends and dividend policy.
1Q 2013 Unconsolidated Earnings PresentationGaranti Bank
This document provides a 3-month earnings presentation for an investor relations meeting. It summarizes the bank's key financial results for 1Q2013, including a 35% year-over-year increase in comparable net profit. It discusses the bank's strategy of selective lending growth focused on profitable retail loans, with an emphasis on maintaining strong asset quality and capital ratios. The presentation highlights growth in areas like mortgages, auto loans, and credit cards while managing funding costs and operating expenses tightly to support sustainable profitability.
Garanti Bankası Earnings Presentation-BRSA Unconsolidated Financials December...Garanti Bank
This document provides an earnings presentation for BRSA Bank for the fourth quarter and full year of 2012. Some key highlights include:
- Net income increased 25% year-over-year on a comparable basis, with a focus on improving core banking revenues and prudent provisioning.
- The bank leveraged its reduced securities holdings into higher-yielding loans, with a focus on profitable retail products like mortgages and auto loans.
- The loan portfolio composition became increasingly customer-driven, while the liquidity and funding positions remained strong, with low-risk deposits making up two-thirds of total deposits.
- Overall, the results demonstrated sound core banking performance and sustained profit generation based on strong fundamentals.
Nicholas Financial is rated a BUY with a price target of $16. Key points include:
1) NICK is underleveraged compared to peers and has achieved high returns on equity given its leverage.
2) NICK could be an attractive acquisition target due to its free cash flow, low price-earnings ratio, and Canadian headquarters.
3) The recent sell-off in price was unwarranted and due to risk-arbitrage fund selling, not a change in NICK's investment outlook. NICK remains undervalued relative to peers and warrants a higher price.
Merrill Lynch reported a net loss of $1.97 billion for Q1 2008 compared to net earnings of $2.03 billion in Q1 2007. Revenues fell 69% to $2.9 billion due to write-downs related to US ABS CDOs and credit valuation adjustments on hedges with financial guarantors. However, Global Wealth Management saw record quarterly revenues with strong fee income and $9 billion in annuity inflows. While investment banking revenues fell 40% due to lower deal volumes, the business pipeline was only down 5% overall from year-end levels.
JPMorgan Chase reported second quarter 2013 net income of $6.5 billion, down from $5 billion in the second quarter of 2012. Revenue was $26 billion, up from $22.9 billion the prior year. Return on tangible common equity was 17%, up from 15% in 2012. Consumer & Community Banking saw deposit growth of 10% and record credit card sales volume of $105.2 billion, though net income fell to $3.1 billion due to lower revenue and higher expenses. Mortgage originations increased 12% to $49 billion while net income fell to $1.1 billion on lower revenue.
JPMorgan Chase reported third quarter 2010 net income of $4.4 billion, up 23% from the third quarter of 2009. Revenue was $24.3 billion. The Investment Bank reported solid earnings and maintained its #1 ranking for global investment banking fees and global debt/equity. Retail Financial Services had strong mortgage production and continued branch expansion. Card Services saw increased sales volume and improved credit trends. Commercial Banking reported record revenue. Asset Management had $38 billion in net inflows. Credit costs declined but mortgage and credit card losses remained high. The Firm's capital and credit reserves remained strong.
JPMorgan Chase reported third quarter 2010 net income of $4.4 billion, up 23% from the third quarter of 2009. Revenue was $24.3 billion. The Investment Bank reported solid earnings and maintained its #1 ranking for global investment banking fees and global debt/equity. Retail Financial Services had strong mortgage production and continued branch expansion. Card Services saw increased sales volume and improved credit trends. Commercial Banking reported record revenue. Asset Management had $38 billion in net inflows. Credit costs declined but mortgage and credit card losses remained high. The Firm's capital and credit reserves remained strong.
JPMorgan Chase reported first quarter 2010 net income of $3.3 billion, up from $2.1 billion in the first quarter of 2009. The Investment Bank generated strong results driven by fixed income markets revenue. Retail Financial Services reported a net loss due to high credit costs, though Retail Banking saw higher profits. While credit costs remained elevated, the firm saw signs of stabilization and improvement in some consumer credit portfolios.
JPMorgan Chase reported first quarter 2010 net income of $3.3 billion, up from $2.1 billion in the first quarter of 2009. The Investment Bank generated strong results driven by fixed income markets revenue. Retail Financial Services reported a net loss due to high credit costs, though Retail Banking saw higher profits. While credit costs remained elevated, the firm saw signs of stabilization and improvement in some consumer credit portfolios.
JPMorgan Chase reported third quarter 2009 net income of $3.6 billion, an increase from $527 million in third quarter 2008. Revenue was $28.8 billion, a record year-to-date. Credit costs remained high at $31.5 billion and the firm added $2 billion to consumer credit reserves. The firm's capital levels were strengthened with Tier 1 Common at $101 billion and ratios of 8.2% and 10.2% respectively. While signs of credit stability emerged, continued uncertainty led to higher reserves. The firm's strong capital position will enable continued investment despite this uncertainty.
JPMorgan Chase reported third quarter 2009 net income of $3.6 billion, an improvement from $527 million in the third quarter of 2008. Revenue was $28.8 billion, a record level for the year to date. Credit costs remained high at $2 billion added to consumer credit reserves, bringing the total to $31.5 billion. The firm's capital levels were strengthened with Tier 1 Common Capital reaching $101 billion, or 8.2% of the total. While signs of stability were seen in consumer credit, continued uncertainty remains around the economy. JPMorgan Chase aims to continue investing in its businesses through the challenging environment.
JPMorgan Chase reported second quarter 2010 net income of $4.8 billion, up significantly from $2.7 billion in the second quarter of 2009. Revenue was $25.6 billion. While most businesses performed solidly with reduced credit costs, returns in consumer lending remained unacceptable. The bank maintained strong capital and liquidity positions. Looking ahead, Dimon noted regulatory reforms could impact clients and businesses, and implementation will require careful coordination.
JPMORGAN CHASE REPORTS THIRD-QUARTER 2013 NET LOSS OF $0.4 BILLION, OR $(0.17) PER SHARE, ON REVENUE1 OF $23.9 BILLION
THIRD-QUARTER 2013 NET INCOME OF $5.8 BILLION, OR $1.42 PER SHARE, EXCLUDING LITIGATION EXPENSE AND RESERVE RELEASES1
JPMorgan Chase reported third quarter 2011 net income of $4.3 billion, down slightly from $4.4 billion in third quarter 2010. Revenue was $24.4 billion. While the investment banking environment was challenging, JPMorgan maintained its #1 ranking for global investment banking fees year-to-date. Consumer & business banking reported higher revenue and deposits. Credit card sales volume was up 10% and net charge-offs declined as expected. The firm repurchased $4.4 billion in stock and maintained a Basel I Tier 1 ratio of 9.9% and estimated Basel III ratio of 7.7%.
Gulf South Bank held a conference on May 13, 2013. The presentation included the following key points:
- Gulf South Bank has a diversified footprint across the Gulf South with two well-known brands and a loyal customer base.
- Recent acquisitions have created a premier Gulf South financial services franchise with leading market share in key regions.
- Asset quality metrics improved compared to prior quarters, with nonperforming assets decreasing.
- Earnings remained solid compared to peers, though net interest margin was impacted by lower earning asset yields. Expense reductions are planned to offset this impact over time.
- Capital levels remain strong and excess capital will be deployed through a stock repurchase program.
Sterling Bancorp reported financial results for full year and fourth quarter 2009. Net income for 2009 was $9.4 million, down from $16 million in 2008, due to a higher provision for loan losses and increased expenses, which offset higher net interest income and noninterest income. For the fourth quarter, net income was $2.6 million, down from $4 million a year ago. Sterling's pre-tax, pre-provision income rose 26% for the full year and 29% for the fourth quarter, driven by loan and deposit growth, increased noninterest income, and expense management. Credit quality improved as nonaccrual loans decreased in the third and fourth quarters.
JPMorgan Chase First Quarter 2008 Financial Results Conference Call finance2
JPMorgan Chase reported net income of $2.4 billion for the first quarter of 2008, down 49% from $4.8 billion in the first quarter of 2007. Earnings per share were $0.68, down from $1.34 the previous year. The Investment Bank saw declines in revenue and increases in credit losses. Retail Financial Services increased revenue but also significantly increased its provision for credit losses due to deterioration in home equity and subprime portfolios. JPMorgan Chase maintained a strong capital position despite challenges in the market and credit environment.
JPMorgan Chase reported third quarter 2011 net income of $4.3 billion, down slightly from $4.4 billion in third quarter 2010. Revenue decreased due to challenging market conditions impacting the Investment Bank. The firm maintained its #1 ranking for Global Investment Banking Fees year-to-date. Consumer & Business Banking reported higher revenues and deposits compared to a year ago. Credit quality improved with lower credit card and wholesale credit losses, while mortgage losses remained elevated. The firm repurchased $4.4 billion in stock and estimated its Basel III Tier 1 ratio was 7.7% at the end of the third quarter.
This document provides an investment summary and recommendation on Zions Bancorporation (ZION). It issues a HOLD recommendation with a target price of $43.18, representing a 1% upside from the current price of $43.04. The summary cites factors such as ZION's efforts to reduce risky loans and focus on fee income through asset management as reasons for its strong performance. However, the current price has likely priced in the positive outlook, so only modest upside is expected. Limited downside risks exist due to an improving regulatory and interest rate environment.
Compared to equities, bonds at first glance can appear like a throwback to your grandparent's days, but this month we take a look at how bonds may help mitigate risk, and the role they play in a well-diversified portfolio.
FIS Research - High Performance Community BankingPaul McAdam
Historically, economies of scale have provided larger financial institutions with the ability to generate lower efficiency ratios and, often, higher returns on assets than community banks. Despite the disadvantages of their smaller size, some community banks outperform larger banks as well as their community bank peers during both good and bad times. This research brief focuses on the financial metrics of high-performing community banks to determine the characteristics that differentiate the elite performers from the rest of the pack.
Regency Centers Trust is a retail REIT that focuses on generating cash from operations and continually growing that ability. The report analyzes Regency's ability to raise cash, growth potential given the retail industry environment, current economy impacts, interest rate risk, investment positives like relationships with major retailers, and investment risks around areas weak to economic changes and reliance on major tenants. It also summarizes Regency's balance sheet, capital structure, debt obligations, liquidity, net income trends and dividend policy.
1Q 2013 Unconsolidated Earnings PresentationGaranti Bank
This document provides a 3-month earnings presentation for an investor relations meeting. It summarizes the bank's key financial results for 1Q2013, including a 35% year-over-year increase in comparable net profit. It discusses the bank's strategy of selective lending growth focused on profitable retail loans, with an emphasis on maintaining strong asset quality and capital ratios. The presentation highlights growth in areas like mortgages, auto loans, and credit cards while managing funding costs and operating expenses tightly to support sustainable profitability.
Garanti Bankası Earnings Presentation-BRSA Unconsolidated Financials December...Garanti Bank
This document provides an earnings presentation for BRSA Bank for the fourth quarter and full year of 2012. Some key highlights include:
- Net income increased 25% year-over-year on a comparable basis, with a focus on improving core banking revenues and prudent provisioning.
- The bank leveraged its reduced securities holdings into higher-yielding loans, with a focus on profitable retail products like mortgages and auto loans.
- The loan portfolio composition became increasingly customer-driven, while the liquidity and funding positions remained strong, with low-risk deposits making up two-thirds of total deposits.
- Overall, the results demonstrated sound core banking performance and sustained profit generation based on strong fundamentals.
Nicholas Financial is rated a BUY with a price target of $16. Key points include:
1) NICK is underleveraged compared to peers and has achieved high returns on equity given its leverage.
2) NICK could be an attractive acquisition target due to its free cash flow, low price-earnings ratio, and Canadian headquarters.
3) The recent sell-off in price was unwarranted and due to risk-arbitrage fund selling, not a change in NICK's investment outlook. NICK remains undervalued relative to peers and warrants a higher price.
Merrill Lynch reported a net loss of $1.97 billion for Q1 2008 compared to net earnings of $2.03 billion in Q1 2007. Revenues fell 69% to $2.9 billion due to write-downs related to US ABS CDOs and credit valuation adjustments on hedges with financial guarantors. However, Global Wealth Management saw record quarterly revenues with strong fee income and $9 billion in annuity inflows. While investment banking revenues fell 40% due to lower deal volumes, the business pipeline was only down 5% overall from year-end levels.
JPMorgan Chase reported second quarter 2013 net income of $6.5 billion, down from $5 billion in the second quarter of 2012. Revenue was $26 billion, up from $22.9 billion the prior year. Return on tangible common equity was 17%, up from 15% in 2012. Consumer & Community Banking saw deposit growth of 10% and record credit card sales volume of $105.2 billion, though net income fell to $3.1 billion due to lower revenue and higher expenses. Mortgage originations increased 12% to $49 billion while net income fell to $1.1 billion on lower revenue.
JPMorgan Chase reported third quarter 2010 net income of $4.4 billion, up 23% from the third quarter of 2009. Revenue was $24.3 billion. The Investment Bank reported solid earnings and maintained its #1 ranking for global investment banking fees and global debt/equity. Retail Financial Services had strong mortgage production and continued branch expansion. Card Services saw increased sales volume and improved credit trends. Commercial Banking reported record revenue. Asset Management had $38 billion in net inflows. Credit costs declined but mortgage and credit card losses remained high. The Firm's capital and credit reserves remained strong.
JPMorgan Chase reported third quarter 2010 net income of $4.4 billion, up 23% from the third quarter of 2009. Revenue was $24.3 billion. The Investment Bank reported solid earnings and maintained its #1 ranking for global investment banking fees and global debt/equity. Retail Financial Services had strong mortgage production and continued branch expansion. Card Services saw increased sales volume and improved credit trends. Commercial Banking reported record revenue. Asset Management had $38 billion in net inflows. Credit costs declined but mortgage and credit card losses remained high. The Firm's capital and credit reserves remained strong.
JPMorgan Chase reported first quarter 2010 net income of $3.3 billion, up from $2.1 billion in the first quarter of 2009. The Investment Bank generated strong results driven by fixed income markets revenue. Retail Financial Services reported a net loss due to high credit costs, though Retail Banking saw higher profits. While credit costs remained elevated, the firm saw signs of stabilization and improvement in some consumer credit portfolios.
JPMorgan Chase reported first quarter 2010 net income of $3.3 billion, up from $2.1 billion in the first quarter of 2009. The Investment Bank generated strong results driven by fixed income markets revenue. Retail Financial Services reported a net loss due to high credit costs, though Retail Banking saw higher profits. While credit costs remained elevated, the firm saw signs of stabilization and improvement in some consumer credit portfolios.
JPMorgan Chase reported third quarter 2009 net income of $3.6 billion, an increase from $527 million in third quarter 2008. Revenue was $28.8 billion, a record year-to-date. Credit costs remained high at $31.5 billion and the firm added $2 billion to consumer credit reserves. The firm's capital levels were strengthened with Tier 1 Common at $101 billion and ratios of 8.2% and 10.2% respectively. While signs of credit stability emerged, continued uncertainty led to higher reserves. The firm's strong capital position will enable continued investment despite this uncertainty.
JPMorgan Chase reported third quarter 2009 net income of $3.6 billion, an improvement from $527 million in the third quarter of 2008. Revenue was $28.8 billion, a record level for the year to date. Credit costs remained high at $2 billion added to consumer credit reserves, bringing the total to $31.5 billion. The firm's capital levels were strengthened with Tier 1 Common Capital reaching $101 billion, or 8.2% of the total. While signs of stability were seen in consumer credit, continued uncertainty remains around the economy. JPMorgan Chase aims to continue investing in its businesses through the challenging environment.
JPMorgan Chase reported second quarter 2010 net income of $4.8 billion, up significantly from $2.7 billion in the second quarter of 2009. Revenue was $25.6 billion. While most businesses performed solidly with reduced credit costs, returns in consumer lending remained unacceptable. The bank maintained strong capital and liquidity positions. Looking ahead, Dimon noted regulatory reforms could impact clients and businesses, and implementation will require careful coordination.
JPMORGAN CHASE REPORTS THIRD-QUARTER 2013 NET LOSS OF $0.4 BILLION, OR $(0.17) PER SHARE, ON REVENUE1 OF $23.9 BILLION
THIRD-QUARTER 2013 NET INCOME OF $5.8 BILLION, OR $1.42 PER SHARE, EXCLUDING LITIGATION EXPENSE AND RESERVE RELEASES1
JPMorgan Chase reported third quarter 2011 net income of $4.3 billion, down slightly from $4.4 billion in third quarter 2010. Revenue was $24.4 billion. While the investment banking environment was challenging, JPMorgan maintained its #1 ranking for global investment banking fees year-to-date. Consumer & business banking reported higher revenue and deposits. Credit card sales volume was up 10% and net charge-offs declined as expected. The firm repurchased $4.4 billion in stock and maintained a Basel I Tier 1 ratio of 9.9% and estimated Basel III ratio of 7.7%.
Valuation Analysis and Structured Management Buy-Out of SolarTech Inc.Neda Petkova
The document provides an analysis for a potential management buyout of SolarTech Inc. It includes:
- An analysis of SolarTech's financial performance over recent years which shows increasing sales and profits.
- A comparison of SolarTech's key financial ratios to industry averages, finding them similar or marginally better.
- An evaluation of two scenarios for the management buyout with different debt-to-equity mixes and their impact on returns.
- A recommendation to proceed with the buyout using a debt-to-equity mix of 60% debt and 40% equity as it best meets the desired return and financial covenant parameters.
JPMorgan Chase reported first quarter 2009 net income of $2.1 billion, down from $2.4 billion in the first quarter of 2008. Revenue was a record $26.9 billion driven by strong performance in the Investment Bank. The Investment Bank generated record revenue and net income due to #1 rankings in debt and equity underwriting. Retail Financial Services income was $474 million, improved from a loss the prior year, due to the Washington Mutual acquisition partially offset by higher credit costs. Credit costs increased across portfolios as housing prices declined and delinquencies rose. The company remains well capitalized with a Tier 1 capital ratio of 11.3% and loan loss reserves of $28 billion to withstand
JPMorgan Chase reported first quarter 2009 net income of $2.1 billion, down from $2.4 billion in the first quarter of 2008. While credit costs were high at $10 billion, record firmwide revenue was generated. The Investment Bank achieved record revenue and net income through strong performance in debt and equity markets. Retail Banking saw growth in deposits and checking accounts due to the Washington Mutual integration. The balance sheet remained strong with a Tier 1 capital ratio of 11.3% and loan loss reserves of $28 billion. JPMorgan Chase continued lending activities and foreclosure prevention efforts during the quarter.
This document analyzes JP Morgan Chase & Co. and provides a valuation using different models. Key points:
- JP Morgan is one of the largest and most established financial institutions globally, operating in consumer banking, corporate/investment banking, commercial banking, and asset management.
- Valuation models including a DCF model, dividend discount model, and relative P/TBV multiple yield target prices ranging from $67.53 to $72.15 per share, indicating the stock is undervalued at its current price of $53.07.
- The DCF model uses conservative assumptions around interest margins, loan growth, expenses, and return on tangible equity to derive a fair value estimate of $71.79
Christina WilliamsFin571 Corporate FinanceJoseph McDonald.docxmccormicknadine86
Christina Williams
Fin/571 Corporate Finance
Joseph McDonald
3/23/2020
FINANCIAL ANALYSIS
The analysis of the key performance of 500 fortune company
The analysis will outline the financial performance
The company description
The applications in the financial analysis
Introduction
The aim of this study is to evaluate the key performance of a 500 fortune company, the analysis focus on analyzing the organization financial performance over the period; the cashflows of the operations, performance ratios, the stock and dividends yields and revenue growth for the last three years. The analysis will also provide the company descriptions as well as the applications of this financial analysis
2
Group 1 Automotive, Inc.; NYSE: GPI
Sell used and new car and trucks
Performs auto maintenance and repairs
Offers auto financial and insurance
Ranked position 458 in 500 fortune list
Company’s description
Group 1 automotive Inc. (NYSE: GPI) deal with the new and used car and trucks, perform and maintenance and report repairs, and offers auto financing and offers auto financing and insurance services. Group 1 automotive Inc. is ranked position 458 in the 500 fortune list, thus this means that company is among the best performing automotive company in US
3
Cash flow from operations
Cash flow in 2019
OperationsCashflow 2019Cashflow 2018Cashflow
2017Operating activities $ 370.9$ 270$ 196.5Investment Activities $ - 291$ - 168$ - 312.6Financial activates $ -67$-109.5$ 121.5Net cash-flow $ 9.3 $ 10.9$ 5.4Stock based compensation $ 18.8$ 18.7 $18.9Common stock dividends $ - 20.3$ -20.8$ 20.5
Group 1 Automotive Cash Flow Statement 2005-2020 | GPI. This statement analysis included the all the operations activities in the organization in the three year from 2017 to 2019.
4
Current and historical p/e ratio
P/E Ratio calculation
Comparison of the p/e ratio
Growth rate and p/e
Debts and p/e
Verdict of Group 1automotive p/e
Price-to-earnings ratio
The current price-to-earning ratio of Group 1 automotive stands at 3.82 in this year. The lowest achieved p/e that has ever been recorded for the organization was 0.00 for year 2009. conversely, the highest p/e that was ever recorded for the company was 23.8 for the upper quarter upper of year 2008. P/E ratios primarily reflect market expectations around earnings growth rates. If earnings are growing quickly, then the 'E' in the equation will increase faster than it would otherwise. Group 1 Automotive has a P/E of 3.82 that's below the average in the US market, which is 19.0
5
Variation in the purchase of shares
Limited under the terms of the Revolving Credit Facility
$132.3 million in restricted payments
Dividends of $0.22, 0.3 and 0.91 per share
Stock dividends and the yield
The stock purchase program for the vary from time to time depending on the Board of director directives. However, the company stock operations are regulated by Revolving credit facility. For, in this the tr ...
Christina WilliamsFin571 Corporate FinanceJoseph McDonald.docxgordienaysmythe
Christina Williams
Fin/571 Corporate Finance
Joseph McDonald
3/23/2020
FINANCIAL ANALYSIS
The analysis of the key performance of 500 fortune company
The analysis will outline the financial performance
The company description
The applications in the financial analysis
Introduction
The aim of this study is to evaluate the key performance of a 500 fortune company, the analysis focus on analyzing the organization financial performance over the period; the cashflows of the operations, performance ratios, the stock and dividends yields and revenue growth for the last three years. The analysis will also provide the company descriptions as well as the applications of this financial analysis
2
Group 1 Automotive, Inc.; NYSE: GPI
Sell used and new car and trucks
Performs auto maintenance and repairs
Offers auto financial and insurance
Ranked position 458 in 500 fortune list
Company’s description
Group 1 automotive Inc. (NYSE: GPI) deal with the new and used car and trucks, perform and maintenance and report repairs, and offers auto financing and offers auto financing and insurance services. Group 1 automotive Inc. is ranked position 458 in the 500 fortune list, thus this means that company is among the best performing automotive company in US
3
Cash flow from operations
Cash flow in 2019
OperationsCashflow 2019Cashflow 2018Cashflow
2017Operating activities $ 370.9$ 270$ 196.5Investment Activities $ - 291$ - 168$ - 312.6Financial activates $ -67$-109.5$ 121.5Net cash-flow $ 9.3 $ 10.9$ 5.4Stock based compensation $ 18.8$ 18.7 $18.9Common stock dividends $ - 20.3$ -20.8$ 20.5
Group 1 Automotive Cash Flow Statement 2005-2020 | GPI. This statement analysis included the all the operations activities in the organization in the three year from 2017 to 2019.
4
Current and historical p/e ratio
P/E Ratio calculation
Comparison of the p/e ratio
Growth rate and p/e
Debts and p/e
Verdict of Group 1automotive p/e
Price-to-earnings ratio
The current price-to-earning ratio of Group 1 automotive stands at 3.82 in this year. The lowest achieved p/e that has ever been recorded for the organization was 0.00 for year 2009. conversely, the highest p/e that was ever recorded for the company was 23.8 for the upper quarter upper of year 2008. P/E ratios primarily reflect market expectations around earnings growth rates. If earnings are growing quickly, then the 'E' in the equation will increase faster than it would otherwise. Group 1 Automotive has a P/E of 3.82 that's below the average in the US market, which is 19.0
5
Variation in the purchase of shares
Limited under the terms of the Revolving Credit Facility
$132.3 million in restricted payments
Dividends of $0.22, 0.3 and 0.91 per share
Stock dividends and the yield
The stock purchase program for the vary from time to time depending on the Board of director directives. However, the company stock operations are regulated by Revolving credit facility. For, in this the tr.
This document contains solutions to problems from FIN 515 Week 6. It includes solutions to 5 problems labeled 16-1 through 16-5. It also includes a link to get additional tutorial information. The document provides the questions and multiple choice answers to 6 additional business and finance problems. It gives the questions, possible answers and identifies the correct answers. The problems cover topics like market value, capital budgeting techniques, stock valuation, cash budgeting and additional funds needed.
JPMorgan Chase reported net income of $2.4 billion for the first quarter of 2008, down 49% from the first quarter of 2007. Earnings per share were $0.68 compared to $1.34 in the prior year. The Investment Bank saw significant declines in revenue and increased credit losses. Retail Financial Services also reported an increased provision for credit losses related to deteriorating home equity and subprime mortgage portfolios. However, the firm maintained a strong capital position with a Tier 1 capital ratio of 8.3%. JPMorgan also announced the planned acquisition of Bear Stearns during the quarter to enhance client services.
1. Our book mentions, An analyst could easily get lost in examini.docxjackiewalcutt
1. Our book mentions, “An analyst could easily get lost in examining ratios and lose track of financial management’s primary objective – the maximization of shareholders’ wealth. The manager and analyst must be concerned with how ratios can help to explain share price behavior. It’s important to know why the price is outperforming competing firms’ price or why the stock is underperforming its peers” (Byrd et al, 2013). The ticker symbol for the company I chose that starts with the first letter of my last name “Canales” is Coca Cola. Since I am comparing financial ratios, the other company from the same industry that I’m comparing it to is PepsiCo.
Current Ratio (CR) – Current ratio = current assets ÷ current liabilities. This type of ratio defines how effective the organization is with repaying their current debts from their current assets. Coca Cola’s CR is 1.090, whereas PepsiCo’s CR is 1.095; they are pretty much neck and neck and 1:1 is the reliable ratio but each of the organization’s liabilities must be managed.
Net Profit Margin Ratio – This type of ratio shows how effective a firm is to turn its profit from its revenue. In order to get more profit, the company has to have more sales. On the other hand, a low ratio denotes that its consumers are not happy with its products thus sales fall. This ratio is computed by: Net profit ÷ sales x 100. The net profit ratio for Coca Cola is 18.8% (The Coca Cola Company, 2014) and 9.4% for PepsiCo (PepsiCo, 2014). Both companies show net profits in the forefront of the industry but Coca Cola can turn its sales to profit more than PepsiCo. Although, the cause for the low net profit may be attributed to changes in their soda choice.
Assets Turnover Ratio – This type of ration defines and overall effectiveness of an organization’s daily operations. Coca Cola’s ratio is at 5.78 and PepsiCo’s ratio is 8.87. Since Coca Cola is at a low ration this tells us that this company is not as effective as PepsiCo (possibly due to inefficient use of equipment or inventory loss, etc.). In contrast, PepsiCo shows an increase in assets turnover ratio although the company must pay attention to its net profit that is decreasing. As a result, PepsiCo must put a lot more emphasis in its weak areas to raise their net profit.
Angie
References
Byrd, J., Hickman, K., & McPherson, M. (2013). Managerial Finance. San Diego, CA: Bridgepoint
The Coca Cola Company. (2014). Form 10-K.Annual Report. Retrieved from http://assets.cocacolacompany.com/d2/78/7d7cad454f3fbd033d55d786b890/2014-annual-report-on-form-10-k.pdf
Pepsico. (2014). Pepsico 50 years & growing.PepsiCo 2014 Annual Report. Retrieved from http://www.pepsico.com/docs/album/default-document-library/pepsico-2014-annual-report_final.pdf?sfvrsn=0
2.
I have decided to pick Disney(Walt Disney Company) as my company. Its ticker symbol is DIS. Disney is not just a movie company anymore. It has become a huge media conglomerate. They own ESPN, ABC, Mirama ...
Similar to Stonier 1 Bank Performance Intersession_MJC (20)
1. Our book mentions, An analyst could easily get lost in examini.docx
Stonier 1 Bank Performance Intersession_MJC
1. Martin Cole
Examiner II, FRB Cleveland
Stonier 1 Extension Program - 2014
Stonier Graduate School of Banking
Bank Performance Analysis Extension
Project
Martin J. Cole II
Examiner II
Federal Reserve Bank of Cleveland
2. Martin Cole
Examiner II, FRB Cleveland
Stonier 1 Extension Program - 2014
Introduction
While I am a bank examiner in the Community Banking Organization (“CBO”) business
line of the Federal Reserve Bank of Cleveland, I decided to choose a Large Banking
Organization (“LBO”). I decided to perform a financial analysis on Comerica Bank. I have
examined this company but only from a Risk-Weighted Assets (“RWA”) perspective associated
with the Comprehensive Capital and Analysis Review (“CCAR”). All financial indicators cited
in this assessment are from the December 31, 2013 Uniform Bank Performance Report
(“UBPR”), Comerica’s 2013 Annual Report and peer comparisons; this peer group is the average
of all commercial banks throughout the country with assets greater than $3 billion (199
banks).The year-end financial date was chosen as it provides a simple “cut-off” to gain a clear
picture for 2013.
Comerica Incorporated (NYSE: CMA) is a financial services company headquartered in
Dallas, Texas, and strategically aligned by three business segments: The Business Bank, The
Retail Bank, and Wealth Management. Comerica focuses on relationships, and helping people
and businesses achieve success. In addition to Texas, Comerica Bank locations can be found in
Arizona, California, Florida and Michigan, with select businesses operating in several other
states, as well as in Canada and Mexico. Comerica reported total assets of $65.7 billion at March
31, 2014.
3. Martin Cole
Examiner II, FRB Cleveland
Stonier 1 Extension Program - 2014
Uniform Bank Performance Analysis Questions
1. Describe the behavior of your bank’s ROA over the last 4 quarters. (The ROA is on page 1 in
the line item “Net Income.”)
a. How does the performance of ROA relate to that of your peer group over this period?
b. What are the main factors that account for the behavior of your ROA over this period?
c. What has been the impact, if any, of your profit performance on your bank’s Tier 1 Leverage
Capital Ratio (also on Page 1) over this horizon? Has your bank raised capital externally or
altered its dividend over this period?
Comerica Bank’s net income of $581 million equates the Return on Average-Assets
(“ROAA”) to 0.91% as of December 31, 2013; this compares unfavorably to the peer average of
1.01% and ranks in the 41st percentile. During the prior three quarter time period, the annualized
ROAA remained relatively stable at 0.96%, 0.94% and 0.91% during quarters ended, September,
June and March, respectively. All quarter-ended figures remained below the peer averages of
1.03% (45th percentile), 1.02% (43rd percentile) and 0.99%(44th percentile), respectively. The
main factors that contribute to CMA’s ROAA, in general, are:
Net interest income, which is the difference between;
o Interest income
o Interest expense
Non-interest income
Non-interest expense
Provision for loan & lease losses
Realized gains & losses on security sale transactions
4. Martin Cole
Examiner II, FRB Cleveland
Stonier 1 Extension Program - 2014
The main factors contributing to earnings performance will be discussed further in the
following questions detailed below. The earnings performance of CMA has had a positive, albeit
minimal, impact on capital and the tier one leverage. As of December 31, 2013, the tier one
leverage capital ratio of 10.7% exceeds peer of 9.9% and is in the 67th percentile; the tier one
leverage capital ratio increased minimally from 10.5% year-over-year. While net income of
$581 million would provide a substantial boost to tier one capital, dividends of $480 million
inhibits retained earnings growth and equates to a cash dividend to net income rate of 82.6%; this
nearly doubles peer of 43.1% and ranks in the 80th percentile. Cash dividends appear to be
relatively inconsistent as dividends paid for 2013 are $10.1 million less from a year ago despite a
higher 2013 net income. With CMAs current capital levels being ahead of peer, there have not
been any external capital raises from the secondary market.
5. Martin Cole
Examiner II, FRB Cleveland
Stonier 1 Extension Program - 2014
2. Describe the behavior of your bank’s efficiency ratio over the last 4 quarters. (The efficiency
ratio is on Page 3 of your UBPR.)
a. How is the efficiency ratio calculated?
b. How does your performance relate to that of the peer group banks?
c. What factors have affected your efficiency ratio over this time horizon? In particular, were
changes in non-interest expense or changes in total net revenue the more dominant factor? Were
the impacts favorable or unfavorable?
Specific information regarding non-interest income and expense may be found on page 4
of the UBPR, Noninterest Income, Expenses and Yields. Total overhead expense, also known as
the efficiency ratio, is a culmination of Salaries and employee benefits, expenses of premises and
fixed assets and other noninterest expense divided by average assets. CMA has managed to
become slightly more efficient compared to peer in 2013 as they decreased noninterest expense
by $28.7 million. Total overhead expenses as a percent of average assets equates to 2.67%,
compares favorably to peer average of 2.72% and ranks in the 43rdpercentile; this is a slight
improvement from the year-over-year figure of 2.76%. Per CMA’s 10-k, the improvement was
primarily due to decreases of $35 million in merger and restructuring charges, $15 million in
salaries expense and smaller decreases in other categories of noninterest expense. To gain a
clearer perspective of what the main contributors were to the overall reduction in overhead
expenses, we must examine each component. It should be noted that all factors of total overhead
expense (personnel, occupancy and other operating expenses) decreased year-over-year as a
percent of average assets.
Personnel expense decreased $8.6 million year-over-year from $976.4 million to $967.8
million. While this equates to a decrease from 1.56% to 1.52% year-over-year, personnel
expenses remain noticeably above the peer average of 1.32% and rank in the 65th percentile. Per
6. Martin Cole
Examiner II, FRB Cleveland
Stonier 1 Extension Program - 2014
CMA’s 10-k, the decrease in salaries expense primarily reflected reduced staffing levels and
lower executive incentive compensation, partially offset by an increase in deferred compensation
expense and annual merit increases.
Occupancy expenses decreased $4.5 million to $205.6 million from $210.1 million year-
over-year. As a percent of average assets, the ratio decreased slightly from 0.34% to 0.32%, is
comparable to the peer average of 0.33%, and ranks in the 45th percentile. The decrease was
primarily due to savings associated with leased properties exited in 2012 and lower utility
expense resulting primarily from a combination of favorable price renegotiations and
conservation efforts. Also, a reduction in equipment depreciation expense, in part reflecting
delayed replacement of fully depreciated assets had a positive impact partially offset by an
increase in maintenance expense and an increase in property tax expense as a result of refunds
received in 2012 related to settlements of tax appeals.
Other operation expenses, which includes intangibles such as goodwill, decreased by
$9.9 million from $532 million to $521.1 million year-over-year. This equates to 0.82% of
average assets which is down from 0.87% and compares favorably to the peer average of 1.02%
7. Martin Cole
Examiner II, FRB Cleveland
Stonier 1 Extension Program - 2014
3. Describe the behavior of your bank’s net interest margin over the last 4 quarters and discuss
how the behavior of NIM relates to that of your peer group. (Your institution’s NIM is on Page 1
of the UBPR. It is the bottom line in the “Margin Analysis” section.)
a. How is net interest margin calculated?
b. What are the primary factors that account for NIM performance over this period? Were the
impacts favorable or unfavorable?
c. What is the outlook for your NIM over the next 12 months and what are the primary
assumptions behind this forecast?
The Net Interest Margin (“NIM”) is calculated by taking interest income minus interest
expense and dividing that figure by average earning assets. The NIM measures net interest
income relative to the amount of earning assets on an institution’s balance sheet. A high ratio
indicates stronger core earnings and is ideal when reviewing the UBPR. Given the current and
stable low rate environment that has been exhibited since The Great Recession, NIM has steadily
contracted throughout the banking industry and CMA is no exception to the trend within the
industry. As of yearend 2013, the NIM of 2.83% of average assets significantly lags the peer
average of 3.50% and ranks in the 16th percentile; the NIM contracted 17 basis points year-over-
year from 2012. While at first glance core earnings appear strained, the mitigating factor is the
CMA is primarily a commercial lending bank (commercial loans make up approximately +90%
of the entire loan portfolio) which is traditionally driven by higher dollar volume and lower
interest rates. The low interest income, and resulting NIM, may also be indicative of a
conservative credit culture when considering the minimal losses and past dues currently on
CMAs balance sheet. When looking at the NIM, one must review the components of interest
income and interest expense to gain an understanding of the major drivers associated with the
margin.
8. Martin Cole
Examiner II, FRB Cleveland
Stonier 1 Extension Program - 2014
Continued review of page 1 of the UBPR indicates that interest income represents 2.81%
of average assets which compares unfavorably to the peer average of 3.61% and ranks in the 14th
percentile; the ratio decrease from the year-over-year 2012 figure of 2.99% . Interest income is
driven by the interest rate earned on assets multiplied by the volume of assets on the balance
sheet. Page 3 of the UBPR, Noninterest Income, Expenses and Yields, provides the “Yields On”
and “Cost Of” (for interest expense which will be discussed later) to give an idea how the
interest rates within CMAs balance sheet. The average rate earned on Total Loans & Leases is
3.50%, is down from 3.74% year-over-year, and significantly lags the peer average of 4.74%;
this ranks in the 8th percentile. This is obviously the primary driver behind NIM compression as
all loan types, except loans in foreign offices, are below the peer average. One loan type of note,
when including loan balance considerations, is the commercial & industrial portfolio. The
portfolio earns 3.26% compared to peer of 4.55% and ranks in the 11th percentile. The low rate
earned is further exacerbated when considering C&I loans dominate CMAs loan portfolio. Rates
earned on the investment portfolio, whose primary functions serve as an additional source of
liquidity and earnings, is more in line with peer. Total Investment Securities (tax-equivalent)
earn 2.26% compared to the peer average of 2.36% and ranks in the 46th percentile.
Interest expense, at 0.16%, is well below the peer average of 0.36% and ranks in the 17th
percentile; this is only a minor decrease from 0.20% noted year-over-year, 2012. Looking more
closely, that average yield paid for Total Interest Bearing Deposits is 0.12% compared to the
peer average of 0.36% and ranks in the 8th percentile as all deposit products paid by CMA are
lower than peer (i.e. transaction accounts, other savings deposits, time deposits over $100
thousand, all other time deposits and foreign office deposits). The same can be said about fed
funds purchased & repos, other borrowed money, and subordinated notes & debentures.
9. Martin Cole
Examiner II, FRB Cleveland
Stonier 1 Extension Program - 2014
Collectively, All Interest-Bearing Funds costs CMA 0.20% compared to the peer average of
0.47% and ranks in the 15th percentile.
10. Martin Cole
Examiner II, FRB Cleveland
Stonier 1 Extension Program - 2014
4. What is your bank’s current level of non-performing loans to total loans and how has it
changed over the last 4 quarters. (The relevant information is on Page 1 and Page 8 of your
UBPR.)
a. How does this performance relate to that of your peer banks?
b. Relative to peers, which categories of loans have above-average NPL ratios?
c. What do you see as the main reason(s) accounting for this?
d. What is the outlook for loan quality over the next 12 months?
For purposes of this paper (and to prevent any confusion for another common term, non-
current loans), non-performing loans are defined as loans that are 90+ days past due (“PD”) and
loans on non-accrual status. Loans on non-accrual status are those which are no longer accruing
interest as the collectability of principal and interest according to the originally stated terms is
uncertain; if a loan is on nonaccrual status it is in most cases classified (i.e. substandard, doubtful
or loss), or at the very least criticized (rated special mention), on an organization’s books. Non-
current loans will be addressed when discussing the outlook of loan quality over the next twelve
months (Question 4.d).
Non-performing loans as a percent of total loans currently represent 0.81%.; this is a 33%
decrease from the yearend 2013 figure of 1.21%, compares favorably to the peer average of
1.46% and ranks in the 29th percentile. Diving deeper into non-performing loans, both 90+ PD
and non-accrual figures are noticeably below peer. Loans 90+ PD as of yearend 2013 totals
$20.5 million and is down from $41.7 million year-over-year; this 2013 figure equates to 0.05%
of total loans & leases and compares favorably to the peer average of 0.29% (ranking in the 47th
percentile). Non-accrual loans as of yearend 2013 totals $349.9 million and is down from $517.4
million year-over-year; this 2013 figure equates to 0.77% of total loans & leases and compares
favorably to the peer average of 1.05% (ranking in the 40th percentile).
11. Martin Cole
Examiner II, FRB Cleveland
Stonier 1 Extension Program - 2014
In review of pages 8 & 8A of the UBPR, Analysis of Past Due, Nonaccrual &
Restructured, the following categories were above peer as it relates to total non-performing loans
(% of Non-Current Loans and Leases by Loan Type; as of December 31, 2013):
Loans to Finance Commercial Real Estate
o 2.46% compared to the peer average of 2.09% (ranks in the 83rd
percentile); this is a decrease from 0.71% year-over-year.
Single & Multi-Family Mortgages
o 0.68% compared to the peer average of 0.24% (ranks in the 67th
percentile); this is a decrease from 2.87% year-over-year.
Non-Farm & Non-Residential Mortgages
o 1.63% compared to the peer average of 1.47% (ranks in the 61st
percentile); this is a decrease from 2.94% year-over-year.
Loans to Individuals
o 1.33% compared to the peer average of 0.48% (ranks in the 85th
percentile); this is a decrease from 2.48% year-over-year.
Agricultural
o 2.69% compared to the peer average of 0.58% (ranks in the 90th
percentile); this is a sharp increase from 0.01% year-over-year.
Other
o 0.26% compared to the peer average of 0.23% (ranks in the 74th
percentile); this is a decrease from 0.30% year-over-year.
12. Martin Cole
Examiner II, FRB Cleveland
Stonier 1 Extension Program - 2014
While most of these ratios are higher-than-peer, they have declined year-over-year as a
percentage of non-current loans and leases. In addition, when looking at pages 4, 7 & 7A
(Balance Sheet & Analysis of Credit Allowance and Loan Mix) the aforementioned loan
categories noted, as a percentage of total loans & leases, are nominal in nature and present
minimal risk to the risk profile of the organization. For example, Agricultural Loans (the only
category whose non-current ratio increased year-over-year) at $72.2 million represent 0.13% of
total loans & leases on CMA’s balance sheet. Given the sharp incline in non-current loans, in
conjunction with the large associated charge-off figures (up from 0.02% to 1.19% and ranks in
the 92nd percentile; the peer average is 0.09%) would indicate two things:
1. From a credit risk management perspective, CMA does not focus on portfolios
with minimal dollar amounts which ultimately results in (in the case of the
Agricultural portfolio);
2. One or two large relationships within the portfolio deteriorating and being
charged off.
Considering the improving economic environment, one would expect the figures to
continue their declining trend. In the case of the Agricultural portfolio, it appears as though one
or two large credits materially affected the past due and net loss figures. The expectation is that
the figures fall in line with historical performance once they are written off from CMA’s balance
sheet.
To obtain a picture of loan quality for the next twelve months, it is important to take into
consideration some of the “leading” indicators of credit quality:
Non-performing loans - 90+ days PD and nonaccrual (already discussed)
Loans 30-89 Day PD (one aspect of non-current loans)
13. Martin Cole
Examiner II, FRB Cleveland
Stonier 1 Extension Program - 2014
ALLL/Nonaccrual ratio
Provision expenses
Other Real Estate Owned (“OREO”) balance
As non-performing loans have already been discussed, a quick look will be given to loans
30-89 days past due. As of yearend 2013, Total Loans 30-89 Days PD represents 0.28% of non-
current Loans & Leases; this is down from 0.35% year and compares favorably to the peer
average 0.59% (and ranks in the 24th percentile). More specifically by loan type, the only loans
that are 30-89 Days PD and compares unfavorably to peer are non-farm/non-residential
mortgages, owner occupied non-farm/non-residential and “other” loans. In aggregate, non-
current loans within the 30-89 day pipeline provides minimal exposure to CMA’s balance sheet.
During the height of the financial crisis, banks experienced significant credit deterioration
and losses. With severe credit concerns experienced by financial institutions, regulators focused
on the bank’s Allowance for Loan and Lease Losses (ALLL) Methodology. With that said, one
of the ratios that came under regulatory scrutiny was the ALLL/Nonaccrual ratio. Coverage of
1:1 was ideal as it states that the bank had complete coverage other its non-accruals. With that
said, if the ALLL only covered 0.5x, the ALLL was at risk of being criticized by regulatory
authorities and require additional provision expenses. As of yearend 2013, CMA’s ALLL
coverage to Nonaccruals is 1.71x and compares favorably to peer average of 1.68x and ranks in
the 59th percentile; the coverage ratio is an increase from 1.22x year-over-year.
Provision expenses of $42 million equates to 0.07% of average assets and compares
favorably to the peer average of 0.14% and ranks in the 35th percentile; this is a year-over-year
improvement from $73 million equating to 0.12% of average assets. A reduction in provision
14. Martin Cole
Examiner II, FRB Cleveland
Stonier 1 Extension Program - 2014
expenses indicates improved credit quality and is further mitigated by the minimal amount of
non-current loans (30-89 Days PD) in the “pipeline”.
While considered an asset, the OREO balance is a blemish on an intuition’s balance
sheet. In many cases, there may be additional losses resulting in the sale of OREO properties
from bank’s books. As of yearend 2013, the OREO balance decline nearly 76% to $12.4 million
(0.05% of average assets) from $51.4 million (0.12% of average assets) year-over-year; the
yearend 2013 figure compares favorably to the peer average of 0.28% and ranks in the 27th
percentile. The large decline year-over-year may have contributed to the increases in losses
(especially within the Agricultural portfolio) associated with the disposal of OREO parcels
during 2013.
In conclusion, the outlook for credit quality is favorable given the amount of non-
performing loans, the amount of 30-89 days past due, adequate nonaccrual coverage with the
ALLL and declining provision expenses and OREO balances.
15. Martin Cole
Examiner II, FRB Cleveland
Stonier 1 Extension Program - 2014
5. How does your bank measure its interest rate risk exposure?
a. What do the most recent measures show about the size of this exposure? Is your balance sheet
asset sensitive or liability sensitive?
b. How do these exposures compare to the current ALCO limits on your exposure?
*Question # 5 requires information additional to that contained in the UBPR, but page 9 of the
UBPR does contain some potentially relevant information. Information on interest rate risk is
available in a bank’s Annual Report (10K), provided the bank is a publicly-traded company.
Interest rate risk arises in the normal course of business due to differences in the repricing
and cash flow characteristics of assets and liabilities. Per CMAs 2013 Annual Report, they
utilize various asset and liability management strategies to manage net interest income exposure
to interest rate risk. A combination of techniques is used to manage interest rate risk. These
techniques examine the impact of interest rate risk on net interest income and the economic value
of equity under a variety of alternative scenarios, including changes in the level, slope and shape
of the yield curve and utilizing multiple simulation analyses. In addition, each interest rate
scenario includes assumptions regarding loan growth, investment security prepayment levels,
depositor behavior, yield curves, and overall balance sheet mix and growth.
Per the 2013 Annual Report, the analysis of the impact of changes in interest rates on net
interest income under various interest rate scenarios is management's principal risk management
technique. Management evaluates a base case net interest income under an unchanged interest
rate environment and what is believed to be the most likely balance sheet structure. Existing
derivative instruments entered into for risk management purposes are included in the analysis,
but no additional hedging is forecasted. These derivative instruments currently comprise interest
rate swaps that convert fixed-rate long term debt to variable rates. This base case net interest
income is then compared against interest rate scenarios in which rates rise or decline in a linear,
16. Martin Cole
Examiner II, FRB Cleveland
Stonier 1 Extension Program - 2014
non-parallel fashion from the base case over 12 months. In the scenarios presented, short-term
interest rates increase 200 basis points, resulting in an average increase in short-term interest
rates of 100 basis points over the period. Due to the current low level of interest rates, the
analysis reflects a declining interest rate scenario of a 25 basis point drop in short-term interest
rates, to zero percent.
(in millions) 2013 2012
December 31 Amount % Amount %
Change in Interest Rates:
+200 basis points $ 210 13% $ 178 11%
-25 basis points (to zero percent) (30) (2) (23) (1)
Corporate policy limits adverse change to no more than four percent of management's
base case net interest income forecast, and CMA was within this policy guideline at December
31, 2013. Sensitivity increased from December 31, 2012 to December 31, 2013 primarily due to
higher actual and forecasted non-maturity deposits, which generate higher forecasted excess
reserves and, therefore, increased sensitivity. The risk to declining interest rates is limited as a
result of the inability of the current low level of rates to fall significantly.
In addition to the simulation analysis, an economic value of equity analysis provides an
alternative view of the interest rate risk position. The economic value of equity is the difference
between the estimate of the economic value of the CMAs financial assets, liabilities and off-
balance sheet instruments, derived through discounting cash flows based on actual rates at the
end of the period and the estimated economic value after applying the estimated impact of rate
movements. The economic value of equity analysis is based on an immediate parallel 200 basis
point increase and 25 basis point decrease in interest rates.
17. Martin Cole
Examiner II, FRB Cleveland
Stonier 1 Extension Program - 2014
2013 2012
(in millions) Amount % Amount %
Change in Interest Rates:
+200 basis points $ 670 6% $ 1,031 10%
-25 basis points (to zero percent) (164) (1) (192) (2)
Per the 2013 Annual Report, Corporate policy limits adverse change in the estimated
market value change in the economic value of equity to 15 percent of the base economic value of
equity. CMA was within this policy parameter at December 31, 2013. The change in the
sensitivity of the economic value of equity to a 200 basis point parallel increase in rates between
December 31, 2012 and December 31, 2013 was primarily driven by changes in market interest
rates at the middle to long end of the curve, which most significantly impacts the value of
deposits without a stated maturity. Additionally, a decrease in CMA's mortgage-backed
securities portfolio reduced the level of fixed-rate securities that would decline in value when
interest rates move higher.
At a high-level, to determine whether the bank’s balance sheet is either asset or liability
sensitive, one must determine which side of the balance sheet reprices faster (assets versus
liabilities). If a bank is considered asset-sensitive, more of their assets reprice compared to the
liabilities on its balance sheet. In an upward rate environment these assets, theoretically, reprice
at a higher rate expands net interest income and increases net income (assuming all other factors
are held constant). Conversely, the opposite is true if the bank is liability-sensitive (where a
majority of the liabilities reprice faster than assets. In an upward rate environment, liabilities
would reprice at a higher rate which would contract the net interest income and decrease net
income. The chart below depicts how sensitivity reacts to changing market conditions:
Proportion to In an Increasing In a Decreasing Rate
18. Martin Cole
Examiner II, FRB Cleveland
Stonier 1 Extension Program - 2014
Market Rate Rate Environment Environment
Asset-Sensitive Directly NII Increases NII Decreases
Liability-Sensitive Inversely NII Decreases NII Increases
In review of page 9 of the UBPR, Interest Rate Risk Analysis as a Percent of Assets,
CMA is more closely matched compared to peer in the current flat-to-increasing interest rate
environment. From a contractual/repricing perspective, loans & securities over 3 years is
currently at 18.5% compared to peer of 42.2% and ranks in the 5th percentile; this is an increase
from the year-over year figures of 16.0% and peer average of 37.5%, respectively. Conversely,
liabilities over 3 years are at 0.4% compared to peer of 2.1% and ranks in the 15th percentile.
While the bank has remained stable at 0.4% year-over-year, the peer group has declined from
2.2%.The net over 3 year position of 18.1% is up from 15.5% noted year-over-year, compares to
the peer average of 39.9%, and ranks in the 6th percentile.
Loans & securities over 1 year is currently at 21.5% compared to peer of 54.7% and
ranks in the 3rd percentile; this is a decrease from the year-over year figure of 23.2% while the
peer figure increased from 44.7%. Conversely, liabilities over 1 year are at 1.4% compared to
peer of 6.5% and ranks in the 14th percentile. While the peer has remained stable at 6.5% year-
over-year, the bank has declined from 1.7%. The net over 1 year position of 20.1% is down from
21.4% noted year-over-year, compares to the peer average of 47.7%, and ranks in the 7th
percentile.
Another aspect of CMAs sensitivity to market risk is the consideration associated with
assets containing optionality. CMA has very few variable-rate mortgage loans and pass-throughs
given their current balance sheet make up; as of year-end, 2013 they represent 8.6% of assets
19. Martin Cole
Examiner II, FRB Cleveland
Stonier 1 Extension Program - 2014
compared to peer average of 17.2% and ranks in the 19th percentile. Both figures have decreased
year-over-year from 10.6% and 17.6%, respectively. Loans & securities over 15 years is
currently at 0.3% compared to peer of 4.6% and ranks in the 7th percentile; this is an decrease
from the year-over year figures of 0.4% (CMA) and 4.9% (peer), respectively.
While CMA is closely matched with minimal assets extending past 15 years, the main
overall risk indicator that present substantial risk to the organization are off balance sheet items
(“OBSI”). OBSIs represent 53.7% of assets compared to peer average of 25.3%; this represents
a year-over-year increase for both figures of 51.1% and 24.8%, respectively. OBSIs are difficult
to assess sensitivity as there is no defined amortization and lines may be drawn at any moment
(therefore becoming “on” balance sheet). From a modeling perspective, this makes assessing
OBSIs difficult, much like attempting to model non-maturity deposits (“NMDs”). With that
said, it may be beneficial for CMA to use historical runoff and consumer activity to assess the
potential impact of OBSIs from a sensitivity perspective.
In referencing page 10 of the UPBR, Liquidity & Funding, provides a strong case
supporting CMAs asset-sensitivity position. Short-term assets to short-term liabilities currently
represent 338.4% compared to peer of 152.3% and ranks in the 86th percentile; both figures have
decreased noticeably from 492.1% and 167.4%, respectively. More uniquely, short-term
investments to short-term noncore funding represent 131.5% versus peer of 81.7% and ranks in
the 86th percentile. Collectively, these ratios indicate and reconcile with CMAs 10-k that they
are, in fact, asset-sensitive which is advantageous in the current flat and expected increasing
interest rate environment.
2014 Outlook & Conclusion
20. Martin Cole
Examiner II, FRB Cleveland
Stonier 1 Extension Program - 2014
Per CMAs 2013 Annual Report, the following are the Management expectations for
2014, compared to 2013. Please note that these considerations assume a continuation of a slowly
growing economy and low rate environment:
Average loan growth consistent with 2013, reflecting stabilization in Mortgage Banker
Finance near average fourth quarter 2013 levels, improving trends in Commercial Real
Estate and continued focus on pricing.
Net interest income modestly lower, reflecting a decline in purchase accounting
accretion, to $10 million to $20 million, and the effect of a continued low rate
environment, partially offset by loan growth.
Provision for credit losses stable as a result of stable net charge-offs and continued strong
credit quality offset by loan growth.
Noninterest income stable, reflecting continued growth in customer-driven fee income.
Noninterest expenses lower, excluding litigation-related expenses, reflecting a more than
50 percent decrease in pension expense. Increases in merit, healthcare and regulatory
costs mostly offset by continued expense discipline.
Income tax expense to approximate 28 percent of pre-tax income.
In conclusion, CMA has a favorable outlook in 2014. CMA is in satisfactory condition with
a well-managed credit portfolio and operating and interest expenses. There are opportunities
available to expand the NIM through pricing loans at a higher-rate; however, the current low rate
environment coupled with CMAs apparent conservative lending culture jeopardizes the
opportunity. Lastly, given their asset-sensitivity, CMAs has positioned well now and into the
future once interest rates begin to rise.