1 / 16

Announcement

Announcement. Career (includes banking) job fair Tuesday, February 19 10:30 – 4:00 CH2M Hill Alumni Center. Announcement. College of Business Sustainability Lecture How Nike is Reducing its Environmental Footprint and Incorporating Sustainability into its products. Lorrie Vogel

verlee
Télécharger la présentation

Announcement

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Announcement Career (includes banking) job fair Tuesday, February 19 10:30 – 4:00 CH2M Hill Alumni Center

  2. Announcement College of Business Sustainability Lecture How Nike is Reducing its Environmental Footprint and Incorporating Sustainability into its products. Lorrie Vogel General Manager Considered Products, Nike, Inc. Tuesday February 26 – 12:00 – 1:30 CH2M Hill Alumni Center www.bus.oregonstate.edu/about/sustain.htm

  3. Assignment Assignment #3 due next Monday, February 18 Decision 4 due next Monday

  4. Bank Cost of Funds

  5. Cost of Funds • G & K Chp. 13 • Structure of Liabilities • Cost of Components

  6. Structure of Liabilities • Demand Deposits (Non-Int & MMDA) • Savings (Regular, Money Mkt Svgs) • Small Time Deposits (CDs) • Large Time Deposits (Jumbo CDs) • Fed Funds & Repos

  7. Pricing Policy • Explicit • Rates on MMDA, MM Svgs, Small CDs • Implicit • Amounts of Jumbo CDs and Fed Funds used • Fees on Reg Ckg Accts • Fees on Comm’l Accts and CC Processing

  8. Pricing in Simulation • Comm’l Deposits • Chg/Item, Credit per $100, CC Fee, % New Bus and Off Time Alloc. • Has an effect on Balance, S/C Income, Loan Commitmts & CC Income • Regular Deposits • Chg/Item, Credit per $100, % New Bus and Off Time Alloc., Dev Budget, Premises • Has an effect on Balance, S/C Income, Trust Income

  9. Pricing in Simulation • Money Market Savings • Rate, % New Bus and Off Time Alloc., Dev Budget, Premises • Has an effect on Balance, Trust Income

  10. Cost of Funds • Calc Avg Cost of Funds and compare with Prime Rate on Pg. 7 • Lower Cost of Funds means able to offer lower loan rates  Attract more business • Cost of Funds differs from WACC as specific acct. by acct. tally of funds costs. WACC is a composite of equity and debt expectations for return (see Pg. 23 for WACC calculation)

  11. Cost of Funds (Online Handout) • 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

  12. Expense Multipliers Category I -- .00088 Category II -- .00291 Category III -- .00322 Category IV -- .00545

  13. COF Example Y3Q4 Net Deposits: (From Balance Sheet, page 1) Total Deposits 4,659.397 plus: Fed Funds Purchased 54.229 plus: Funds Borrowed from FRB 0 minus: Cash and due from banks -296.882 Net Deposits 4,416.744 Average Cost of Funds: Non-Interest Expenses Fed Funds Purchased 54.229 times : Category I Quarterly Expense Multiplier 0.00088 0.047722

  14. COF Example Y3Q4 Commercial Demand Deposits - page 2, note 2 664.862 Plus: Due-To-Banks - page 2, note 2 97.662 plus: CD's - page 2, note 3 1139.229 plus: FRB Borrowing) 0 1901.753 times: Category II Quarterly Expense Multiplier 0.00291 [(664.862 + 97.662 + 1139.229 + 0) x .00291] 5.534101 Public Time Deposits - page 2, note 3 430.056 Plus: Public Demand Deposits - page 2, note 2 177.393 Plus: Money Market Savings - page 2, note 3 1778.047 2385.496 Times: Category III Quarterly Expense Multiplier 0.00322 [(295.061 + 196.934 + 1740.220) x .00322] 7.681297

  15. COF Example Y3Q4 Regular Demand Deposits (page 2, note 2) 372.147 Times: Category IV Quarterly Expense Multiplier 0.00545 (372.147 x 0.00545) 2.028201 Total Non-Interest Expense 15.291321 Plus: Total Interest Paid 68.600 (Exclude Capital Note Interest: page 2, note 7) -0.791 (68.6 - 0.791) 67.809 Minus: Net Service Charge Income (page 2, note 9) -3.596 Total Cost 79.504 Times: 4 to annualize X4 Annual Expense 318.017 divided by: Net Deposits (from above) 4416.744

  16. COF Example Y3Q4 Average Cost of Funds = 0.0720 or 7.20% Prime rate for the quarter = 0.0970 or 9.70% From this example, we can see that for period 3.4, the bank's average cost of funds (7.20%) is 2.50 percentage points below the economic prime rate for the quarter (9.7%).

More Related