Introduction
Course Introduction
Syllabus
– Course Description
– Required Resources
– Grading
– Tentative Schedule
Simulation
Stanford Bank Game
– Simulated Bank Operation
– Management Team Experience
Simulation
Concentration on:
– Mechanics: Capital, Cost of Funds,
Maximizing Fee Income
– Management: People Issues, Time
Management and Delegation, “Stickwith-it-ness” and what to do when “you
really don’t know” and that’s ok!
Banking Fundamentals
SPREAD:
Investment Return – Cost of Funds
Investment Return mainly from Loans and
Securities
Cost of Funds mainly from Capital and
Borrowed Funds
Banking Goals
Profitability (Not Size!)
– Spread  4% +
– ROA  1-1.5%
– ROE  12% +
Solvency
– Capital to Assets 7-8%
(No More, No Less)
Balance Sheet
Production/
Service Firm
Financial
Services
ASSETS
ASSETS
Cash
Small
Cash
Small
Accts. Rec.
Medium
Investments
Medium
Inventory
Medium
Loans
LARGE
Fixed Assets
Large
Premises
Small
Liabs/OE
Liabs/OE
Accts. Pay.
Medium
Deposits
Large
L/T Debt
Large
Savings
Large
Owner's Eq
Large
Other Borr’gs
Medium
Capital
Tiny
Income Statement
Production/Svc.
Financial Services
Sales
- COGS
= Gross Margin
- Optg Exp
= EBIT
- Interest Exp
= EBT
- Tax
= Net Income
Total Interest Income
- Total Interest Expense
= Net Interest Income
+ Non-Interest Income
- Non-Interest Expense
- Provision for Loan Losses
= Pre-tax Optg Income
+/- Securities Gains/Losses
- Income Taxes
+/- Extraordinary Items
= Net Income
Assignment for Next Time
Go to Class Webpage (Syllabus)
Go to Jan 10th entry
Click on, print and bring to class
Y1Q4Output.pdf