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Compute the amount of risk adjusted assets

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Reference no: EM13874227

USF Bank Balance Sheet 2010 1. From the balance sheet below, calculate the following.

Cash 1 Checking accounts 84

Deposits @ Federal Reserve 4 Savings accounts 834

Government Bonds 120 Borrowings 274

Government Agency Bonds 50 Subordinated Debt 38

Municipal Bonds 134 Other Liabilities 108

Commercial Paper 30 Total Liabilities 1,338

Residential Mortgages 225

Business Loans 438 Common Stock 54

Consumer Loans 340 Retained Earnings 102

Loan Loss Reserves -5

Fixed Assets 157

Total Assets 1,494 Total Liabilities and Equity 1,494

a. Compute the amount of risk adjusted assets (TRAA)

b. Compute the amount of Tier 1 Common Equity

c. Compute the amount of Tier Total Capital

d. Compute common equity tier 1 percent

e. Compute tier 1 capital percent

f. Compute the total capital ratio

The capital adequacy rating is the only CAMELS measure that is quantitative, based on an international agreement called the Basel Accord
(1) The bankAc€?cs assets are split into four categories on the basis of general riskiness:

A1 = reserves + government securities;

A2 = interbank deposits + fully backed mortgage bonds + government agency securities;

A3 = municipal bonds + residential mortgages;

A4 = other securities (such as commercial paper) + loans + fixed assets (such as buildings)

(2) The bankAc€?cs total risk-adjusted assets (TRAA) are calculated as: TRAA = (0.0 Af- A1) + (0.2 Af- A2) + (0.5 Af- A3) + (1.0 Af- A4).

(3) The bankAc€?cs capital is divided into several categories: tier 1 capital = stockholder equity capital; tier 2 capital = loan loss reserves + subordinated debt; total capital = tier 1 capital + tier 2 capital

(4) A bank is adequately capitalized if its tier 1 capital exceeds 0.04 Af- TRAA and total capital exceeds 0.08 Af- TRAA; it is well capitalized if tier 1 capital exceeds 0.06 Af- TRAA and total capital exceeds 0.10 Af- TRAA.

Reference no: EM13874227

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