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Commercial Bank Financial Statements Guide

The document outlines the financial statements of commercial banks, including the balance sheet and income statement, which report the bank's condition and performance over time. It details the types of investment securities banks hold for income generation and liquidity management, as well as various cash and due from depository institutions. Additionally, it categorizes bank assets, liabilities, equity, and revenue sources, highlighting the importance of maintaining a balance between earning assets and liquidity needs.

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Zunnuraini Aliyu
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22 views2 pages

Commercial Bank Financial Statements Guide

The document outlines the financial statements of commercial banks, including the balance sheet and income statement, which report the bank's condition and performance over time. It details the types of investment securities banks hold for income generation and liquidity management, as well as various cash and due from depository institutions. Additionally, it categorizes bank assets, liabilities, equity, and revenue sources, highlighting the importance of maintaining a balance between earning assets and liquidity needs.

Uploaded by

Zunnuraini Aliyu
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Topic Key Points (Content Preserved)

• Financial information is reported in two basic documents.


• The report of condition (balance sheet): presents assets,
liabilities, and equity capital; reports the bank's condition at a
Financial single point in time
Statements of . • The report of income (income statement): presents revenues,
Commercial Banks expenses, and net profit/loss over a period of time.
• Statements must be submitted to regulators and stockholders at
the end of each calendar quarter: March, June, September, and
December.

• Consists of federal funds sold, repurchase agreements (RPs or


repos), U.S. Treasury and agency securities, securities issued by
states and political subdivisions (municipals), mortgage-backed
securities, other debt and equity securities.
Investment • Used for income generation and liquidity risk management.
Securities • Highly liquid, low default risk, and traded in secondary markets.
• Banks maintain significant amounts of them to meet unexpected
liquidity needs.
• Revenue is lower than from loans and leases, so larger banks
minimize holding too many investment securities.

• Vault cash (item 1): currency and coin for customer withdrawals.
• Deposits at the Federal Reserve (item 2): meet legal reserve
requirements; assist in check clearing, wire transfers, and Treasury
security trades.
Cash and Due from • Deposits at other financial institutions (item 3): used to
Depository purchase services like check collection, check processing, Fed
Institutions funds trading, and investment advice.
• Cash items in process of collection (item 4): checks written
against deposited accounts at other institutions
.• Correspondent bank: provides services to another commercial
bank.

• Bank assets grouped into four major subcategories:


(1) Cash and due from depository institutions
(2) Investment securities
Assets
(3) Loans and leases
(4) Other assets — Investment securities and loans/leases are
earning assets
Category
Account Category Name Short Note
Letter

Service fees charged on


1 d Revenue Non-interest income.
deposit accounts
Time deposits owed to
2 Retail CDs b Liabilities
customers.
3 Surplus and paid-in capital c Equity Contributed capital.
Off-balance-sheet
4 Loan commitments f Unfunded credit lines.
activities
5 Consumer loans a Assets Earning loans.
Short-term interbank
6 Federal funds sold a Assets
loans.
Off-balance-sheet
7 Swaps f Derivative contracts.
activities
Tax-exempt interest
8 Interest on municipals d Revenue
income.
9 Interest on NOW accounts e Expense Interest paid on deposits.
Interest-bearing demand
10 NOW accounts b Liabilities
deposits.
Commercial letters of Off-balance-sheet
11 f Contingent guarantees.
credit activities
Loans & leases held as
12 Leases a Assets
earning assets.
13 Retained earnings c Equity Accumulated profits.
14 Provision for loan losses e Expense Credit loss provision.
Interest on U.S. Treasury Interest income on
15 d Revenue
securities Treasuries.

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