Bank & Financial Institution Modeling

Quick Reference Projecting Financial Statements for a Bank

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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

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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

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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 Companys 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

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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