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Bank _ Financial Institution Modeling Quick Reference – Projecting

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					                                        Bank & Financial Institution Modeling
                                        Quick Reference – Projecting Financial Statements for a Bank

                                                                             http://breakingintowallstreet.com


          Commercial Bank Balance Sheet:                    How to Project Balance Sheet Line Items:
Assets:
  + Cash & Deposits with Banks                       % of Deposits on Liabilities Side
  + Federal Funds Sold                               Balancer; Increase if Assets < Liabilities & SE
  + Securities and/or Securities Borrowed            % Growth Rate or % Deposits
  + Trading Assets                                   % Growth Rate
  + Gross Loans                                      Project Loan Portfolio or Simple % Growth Rate
    – Allowance for Loan Losses                      Add Provisions for CLs, Subtract Net Charge-Offs
  = Net Loans
  + Accrued Interest & Accounts Receivable           % Gross Loans
  + Premises & Equipment                             Add CapEx, Subtract D&A
  + Goodwill                                         Hold Constant
  + Mortgage Servicing Rights                        Add MSR Origination, Subtract IS Mort. Fees & Inc.
  + Other Intangible Assets                          Subtract Scheduled Amortization
  + Other Assets                                     % Growth Rate or % Deposits
= Total Assets


Liabilities:
  + Deposits                                         % Gross Loans
  + Federal Funds Purchased                          Balancer; Increase if Liabilities & SE < Assets
  + Commercial Paper & Short-Term Borrowing          % Gross Loans
  + Trading Liabilities                              % Trading Assets
  + Accounts Payable & Other Liabilities             % Gross Loans
  + Beneficial Interests / Other                     Hold Constant or Simple Growth %
  + Long-Term Debt                                   % Gross Loans
= Total Liabilities


Shareholders’ Equity (SE):
  + Preferred Stock                                  Add Issuances, Subtract Redemptions
  + Common Stock                                     Hold Constant
  + Additional Paid-In Capital                       Add Stock Issuances & Stock-Based Comp.
  + Treasury Stock                                   Subtract Stock Repurchases
  + Accumulated Other Comprehensive Income           Add Misc. Items and FX Effects
  + Retained Earnings                                Add Net Income, Subtract All Dividends
= Total Liabilities + SE
                                        Bank & Financial Institution Modeling
                                        Quick Reference – Projecting Financial Statements for a Bank

                                                                            http://breakingintowallstreet.com


    Interest-Earning Assets, Interest-Bearing            How to Project IEA, IBL & Net Interest Income:
        Liabilities & Net Interest Income:
Assets:
  + Deposits with Banks                              Flows in from Balance Sheet
  + Federal Funds Sold                               Flows in from Balance Sheet
  + Securities and/or Securities Borrowed            Flows in from Balance Sheet
  + Trading Assets – Debt Only                       % Total Trading Assets
  + Gross Loans                                      Flows in from Balance Sheet
  + Other Interest-Earning Assets                    % Other Assets
= Total Interest-Earning Assets


Liabilities:
  + Interest-Bearing Deposits                        % Total Deposits
  + Federal Funds Purchased                          Flows in from Balance Sheet
  + Commercial Paper                                 Flows in from Balance Sheet
  + Other Borrowings & Liabilities                   % Other Borrowings, AP, & Other Liabilities
  + Beneficial Interests                             Flows in from Balance Sheet
  + Long-Term Debt                                   Flows in from Balance Sheet
= Total Interest-Bearing Liabilities


  + Average Interest on IEA                          Add Interest Spread to Average Interest on IBL
  + Average Interest on IBL                          Use Equity Research / Keep in Same Range
= Interest Rate Spread                               Use Equity Research / Keep in Same Range


  + Interest Income                                  IEA Interest * AVERAGE (Beginning and Ending IEA)
  – Interest Expense                                 IBL Interest * AVERAGE (Beginning and Ending IBL)
= Net Interest Income
                                      Bank & Financial Institution Modeling
                                      Quick Reference – Projecting Financial Statements for a Bank

                                                                          http://breakingintowallstreet.com


     Commercial Bank Income Statement:                  How to Project Income Statement Line Items:

Non-Interest Revenue:
  + Investment Banking Fees                         % Growth Rate
  + Principal Transactions                          % Trading Assets or % Trading Liabilities
  + Securities Gains / (Losses)                     Assume $0 or Hold Constant
  + Lending and Deposit Fees                        % (Gross Loans + Deposits)
  + Asset Management                                % Assets Under Supervision or % Growth
  + Mortgage Fees & Income                          % Mortgage & Home Equity Loans
  + Credit Card Income                              % Credit Card Loans
  + Other Income                                    % Growth Rate or Hold Constant
= Total Non-Interest Revenue


  + Interest Income                                 Flows in from IEA / IBL Projections
  – Interest Expense                                Flows in from IEA / IBL Projections
= Net Interest Income


Total Net Revenue
  – Provision for Credit Losses                     % Gross Loans
  – Non-Interest Expenses                           % Net Revenue; Link Amortization to Schedule
= Pre-Tax Income


  – Taxes                                           Assume Effective Tax Rate Based on Historical Data
  + Extraordinary Gains / Discontinued Ops.         Assume $0 in Projected Periods
= Net Income
  – Preferred Stock Dividends                       % Preferred Stock or Hold Constant
= Net Income to Common


÷ Basic Shares                                      Link to Dividend / Stock Schedule (Circular)
= Basic EPS


* Dividend Payout Ratio                             Link to Tier 1 / Tier 1 Common Requirements and
= Dividends Per Common Share                        Work Backwards to Calculate Dividends
                                        Bank & Financial Institution Modeling
                                        Quick Reference – Projecting Financial Statements for a Bank

                                                                            http://breakingintowallstreet.com


    Commercial Bank Cash Flow Statement:                How to Project Cash Flow Statement Line Items:
          Cash Flow from Operations:
+ Net Income                                         Flows in from Income Statement
  + Provision for Credit Losses                      Flows in from Income Statement
  + Depreciation                                     % Revenue
  + Amortization of Intangibles                      Projected in Company’s Filings
  + Stock-Based Compensation                         % Revenue
  + Deferred Income Taxes                            Assume $0 or Use Book / Cash Tax Schedule
  – Increase in Securities on BS                     Flows in from Balance Sheet
  + Net Change in Current Assets / Liabilities       Flows in from Balance Sheet; Review Company Filings
= Cash Flow from Operations (CFO)                    for Exact Items to List Here


           Cash Flow from Investing:
– Increase in Deposits with Banks                    Flows in from Balance Sheet
– Increase in Federal Funds Sold                     Flows in from Balance Sheet
– (Increase in Gross Loans) – Net Charge-Offs        Flows in from Balance Sheet & LLR Schedule
+ Proceeds from Sales & Maturities                   Assume $0 or Hold Constant
– Capital Expenditures                               % Revenue
= Cash Flow from Investing (CFI)


           Cash Flow from Financing:
+ Increase in Deposits                               Flows in from Balance Sheet
+ Increase in Federal Funds Purchased                Flows in from Balance Sheet
+ Increase in Commercial Paper & ST Borrowing        Flows in from Balance Sheet
+ Increase in Beneficial Interests                   Flows in from Balance Sheet
+ Increase in Long-Term Debt                         Flows in from Balance Sheet
+ Common Stock Issued / (Repurchased)                Tied to Tier 1 Capital; Use Dividend / Stock Schedule
+ Preferred Stock Issued / (Redeemed)                Assume $0 or Hold Constant
– Common and Preferred Dividends                     Tied to Tier 1 Capital; Use Dividend / Stock Schedule
= Cash Flow from Financing (CFF)


+ Exchange Rate Effects (FX)                         Assume $0 or Hold Constant

Net Change in Cash = CFO + CFI + CFF + FX
(Equals BS Ending Cash But Does NOT Flow In)
                                          Bank & Financial Institution Modeling
                                          Quick Reference – Projecting Financial Statements for a Bank

                                                                              http://breakingintowallstreet.com


Commercial Bank Dividends & Stock Schedule:                How to Project Dividend & Stock Line Items:
+ Available Tier 1 Common                              = Last Year Common Equity + NI to Common + FX
                                                       Effect + SBC + Stock Issuances – Goodwill, Intangibles
                                                       & Other Tier 1 Adjustments
– Minimum Tier 1 Common Required                       Risk-Weighted Assets * Minimum Tier 1 Common
= Capital Avail. for Dividends / Repurchases           = MAX(Avail. Tier 1 Comm. – Min. Tier 1 Comm., 0)


Basic EPS                                              Flows in from Income Statement
* Dividend Payout Ratio                                Assume Constant or Match Historical Ratios
= Dividends Per Share
* Basic Shares                                         Flows in from Income Statement
= Potential Common Dividends


Allowed Common Dividends                               = MIN(Capital Avail., Potential Common Dividends)


Capital Available for Stock Repurchases                Capital Avail. – Allowed Common Dividends
Stock Repurchases Planned                              Use Equity Research or Hold Constant
Allowed Stock Repurchases                              =MIN(Capital Avail. for Repurchases, Rep. Planned)


Basic Shares                                           Old Basic Shares + Net Change in Basic Shares
Diluted EPS                                            Flows in from Income Statement
* Trailing P/E Multiple                                Decline Each Year from Last Historical P/E
= Implied Future Stock Price


– # Shares Repurchased                                 Allowed Stock Repurchases / Future Stock Price
+ # Shares Issued                                      Stock Issuances from CFS / Future Stock Price
= Net Change in # Basic Shares


+ Dilution from Options / Warrants                     Use TSM with Option / Warrant Counts, Exercise
                                                       Prices, and Implied Future Stock Prices

+ Dilution from Restricted Stock Units                 Hold Constant
= Net Dilution


Diluted Shares Outstanding                             Basic Shares + Net Dilution