Bank Financial Analysis Intersession Problem
Utilizing the UBPR, internal reporting, and engagement from senior management, this
project will build on the analytical foundation created during the session and enhance
your understanding of your bank’s condition, performance, and risk profile. If you are a
regulator or consultant, please select a bank to “adopt” for this exercise.
Following the instructions from your pre-course assignment, go to www.ffiec.gov and
download your bank’s UBPR.
Part II – Short Answers
Provide short answers to the following. Each response should be a paragraph of 8 to 10
sentences. You must include any relevant data points to support your analysis.
1. Describe the composition of your bank’s earning assets.
2. Analyze the quality of your bank’s assets including the trend over the last few
3. Provide an analysis of the level and trend of your bank’s profitability.
Part III – Net Interest Margin
Provide a detailed analysis of the bank’s net interest margin. The analysis should
include the impact from the mix and yield on earning assets and the mix and cost of
liabilities. The analysis should incorporate the level and trend as well as the positive and
negative impact from a variety of internal and external factors. To prevent a simple
recitation of numbers from the UBPR, keep asking yourself “why?” to provide sufficient
qualitative information to complete the analysis.
Part IV – Liquidity
As the economy is many parts of the country has improved, banks have been growing
loan portfolios. The loan growth has been outpacing deposit growth in some banks. In
addition, competition from other banks and the stock market returns are also putting
pressure on deposit growth.
1. Analyze the composition of the bank’s deposit funding.
a. What is the growth trend?
b. How and why has the composition changed over time?
c. Has the bank deployed any strategies to attract deposits?
d. How does the bank analyze the “stickiness” of these deposits? (i.e.
deposits highly susceptible to leaving for a better rate)
e. Who is the greatest source of competition?
f. Has the competition changed in the last few years?
2. Describe the bank’s use of wholesale sources of funds.
a. What is the level and trend of these funds?
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b. Has the bank established any limits on the use of these funds?
c. How does the board monitor any non-core funding strategy?
d. What is the bank’s remaining capacity for additional non-core funds?
3. Discuss the key measures the bank utilizes to monitor and manage.
a. Analyze the level and trend of the measures
b. Summarize the bank’s overall analysis of the bank’s liquidity position
The following documents must be submitted:
1. Executive summary that includes brief personal and bank profiles.
2. Your written analysis from Parts II, III and IV.
3. Your bank’s UBPR or similar report. You may limit this to the following relevant
pages utilized in your analysis. At a minimum, pages: 1, 3, 4, 6, 10.
Written Analysis Guidance
Your analysis should be concise, focusing only on the key points.
Remember, a comprehensive analysis must include level and trend.
Charts and graphs can be an effective communication tool, but must be referenced and
explained in the written analysis.
Ensure that your analysis has a logical flow and leaves no questions unanswered.
Percentages are always more meaningful and more relevant than dollars. (Example:
“The bank made $1,000,000.” vs. “The bank made 0.50% return on assets”)
Analysis is more than simply restating facts. (Example: The net interest margin
increased 50 b.p. Why? …due to a drop in the cost of funds. Why? Etc.).
Including “soft” information can greatly enhance your analysis. This information must
be relevant. This may include history, management philosophy, strategy, significant
changes, and local economic circumstances. Tell your bank’s story!
Get others involved. Interview your senior management and include this valuable
perspective in your analysis. This is especially important for Part III.
Paragraph and sentence structure, punctuation, and spelling always matter. Most
importantly, make sure you create an analysis that makes the reader WANT to read it.
Single-spaced and small fonts have an impact on the grader’s frame-of-mind while
grading. Double-spaced, 12 point type.
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