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Comprehensive Overview of Financial Statements and Asset Liability Management

This course provides an in-depth analysis of financial statements, focusing on key aspects such as construction, main asset and liability descriptions, and relevant ratios for performance evaluation. It covers management tactics concerning funding costs, net interest income forecasting, and capital management, including derivatives. Participants will explore critical regulations and contemporary topics in financial statements and investment management strategies, enhancing their understanding of profitability, capital risks, and liquidity while also addressing the nuances of loans and municipal income taxation.

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Comprehensive Overview of Financial Statements and Asset Liability Management

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Presentation Transcript

  1. Course Review

  2. Course Overview • Fin’l Statements • Construction, S/U, Overview w /Ratios • Main Asset and Liability Descriptions • Mgmt by Spread over Cost of Funds • Asset/ Liability Mgmt • NII Frcst, Wealth Frcst • Mgmt of Capital and Derivatives • Regulation and Current Topics

  3. Fin’l Statements • Construction • Productive assets not PP&E, but Loans/Invmts • S/U • For noting performance • For Forecasting Funding Needs • Ratios: • Profitability, Capital/Risks, Liquidity • Breakdown of ROE, ROA (Spread+Burd-OT) • Risk and Liquidity of Assets and Capital

  4. Fin’l Statements • Main Asset Descriptions • Investments • Description of USTs, Agencies and Muni’s • Tax issues with Muni Income for Banks • Investment Management Styles • Loans, Comm’l & Retail • Characteristics of Loan Class • Evaluation of Loans • Pricing Techniques

  5. Mgmt by Spread over Cost of Funds • Cost of Funds • Base is Net Deposits • Total Dep+FFPurch+FRB-Cash&DueFrom • Costs are Int and Non-Int Expenses • Total Int Paid (excluding Cap Note Int) • Non-Int Expenses from each account times its related expense multiplier (take as given) • Less Net Service Charge Income • Cost of Funds = Costs * 4 / Base

  6. Asset/ Liability Mgmt • NII Frcst (Maturity Gap) • Either by time bucket or across time buckets • NII = Gap *  R • Remember Suggested Gaps given Int Rate Frcst • Wealth Frcst (Duration Gap) • Duration of Assets and Liabilities • E = -[ DA - DL (L/A)] * (R/(1+R) * A • Remember Suggested Gaps given Int Rate Frcst

  7. Mgmt of Capital and Derivatives • Capital Adequacy • Standards, Calculation: Sim & Tiered World • Problems • CAMELS • Derivatives • Fin’l Futures • Options (Caps, Floors and Collars) • Swaps

  8. Regulation and Current Topics • Main Govm’t Players and Action Ability • System concerns of the 1930s vs. Deregulation of the 1980s and 1990s and New Millennium • Trends: • Electronic Banking • Fin’l Services • Global Mgmt

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