Louisville Bank has the following information
for its 2005 and 2006 Uniform Bank Analysis Profitability and
Earnings section on the 1st page of its UBPR
report. PG3 is its peer group of similar size commercial
banks with assets between $300 million and $1 billion.
You are asked to do a historical trend analysis and peer comparison
analysis for Louisville Bank for 2005 and 2006 prior to the U.S.
Subprime Crisis.
|
ROA Analysis |
12/31/2006 |
12/31/2005 |
||
|
Louisville Bank |
|
Louisville Bank |
PG3 |
|
|
IR % |
6.99 % |
6.63 % |
6.28% |
5.84 % |
|
IE % |
3.02 % |
2.70 % |
2.16% |
1.89% |
|
NIM % |
3.98% |
3.94% |
4.12% |
3.96% |
|
NIR % |
0.18% |
0.83% |
0.56% |
0.88% |
|
NIE % |
3.89% |
2.84% |
4.00% |
2.86% |
|
Burden |
3.62% |
2.01% |
3.44% |
1.98% |
|
PLL % |
0.55% |
0.15% |
0.21% |
0.17% |
|
Realized Gain/Loss Sec. |
0.04% |
0.00% |
0.08% |
0.00% |
|
OROA |
(0.25 %) |
1.81% |
0.54% |
1.84% |
|
Tier 1 Leverage Capital Ratio |
7.99% |
9.02% |
7.64% |
8.88% |
OROA Trend & Peer
Comparison Analysis:
- Trend OROA Analysis:
Explain why Louisville Bank’s OROA
declined In 2006 by looking at the trends in
NIM%, Burden%, and PLL% and realized gain on
securities. Why did the Bank’s NIM% change (based
on trends in IR% and IE%),What funding gap
does this imply? Explain why the Burden%
changed (based on trends in NIR% and NIE%). - Peer OROA Analysis: Explain why Louisville Bank has a
lower OROA than Its peer banks (PG3) based on
differences in its NIM, Burden, and
PLL% Compare Louisville Bank’s IR% and IE% to
that of the PG3, how do they differ and how does this explain any
difference in their NIMs. What type of funding gap do the PG3
have?Compare Louisville Bank’s NIR% and NIE% to
that of the PG3, how do they differ and how does this explain any
difference in their Burden %. - Based on the Peer and Trend analysis, what
weaknesses and strengths does Louisville Bank have
compared to its peers (PG3).
