Deck 3: Analyzing Bank Performance

Question 1

Bank assets fall into each of the following categories except:

A) loans.
B) investment securities.
C) demand deposits.
D) noninterest cash and due from banks.
E) other assets.

Answer 1

demand deposits.

Question 2

Banks generate their largest portion of income from:

A) loans.
B) short-term investment.
C) demand deposits.
D) long-term investments.
E) certificates of deposit.

Answer 2

A

Question 3

An example of a contra-asset account is:

A) the loan and lease loss allowance.
B) unearned income.
C) buildings and equipment.
D) revenue bonds.
E) the provision for loan loss.

Answer 3

A

Question 4

A negotiable instrument often used in trading goods that guarantees payment to the owner the instrument is known as (a):

A) bankers acceptance.
B) payment guarantee.
C) commercial paper.
D) bankers payment.
E) repurchase agreement.

Question 5

Which of the following bank assets is the most liquid?

A) Long-term investments
B) Short-term investments
C) Loans
D) Demand deposits
E) Unearned income

Question 6

Typically, "call loans" are:

A) residential mortgages.
B) farm loans.
C) demand deposits.
D) payable on demand.
E) automobile loans.

Question 7

Securities that require unrealized gains or losses to be recorded as a change in stockholder's equity are called:

A) held-to-maturity securities.
B) trading account securities.
C) available-for-sale securities.
D) revenue securities.
E) repurchase agreements

Question 8

Which of the following would not be considered a commercial loan?

A) An interim construction loan
B) A working capital loan
C) A loans to another financial institution
D) A loan to purchase a piece of industrial equipment
E) A loan to expand a factory

Question 9

Which of the following would a bank generally classify as a long-term investment?

A) Treasury bill
B) Vault cash
C) Cash items in process of collection
D) Municipal bond
E) Repurchase agreements

Question 10

Which of the following would a bank generally classify as a short-term investment?

A) Demand deposits
B) Deposits at the Federal Reserve
C) Repurchase agreements
D) Fed Funds purchased
E) Vault cash

Question 11

Loans typically fall into each of the following categories except::

A) real estate.
B) individual.
C) commercial.
D) agricultural.
E) municipal.

Question 12

Checking accounts with unlimited check-writing and pay interest are known as:

A) demand deposit accounts.
B) money market deposit accounts.
C) NOW accounts.
D) certificates of deposit.
E) time deposits.

Question 13

Which of the following is not a characteristic of a typical commercial bank?

A) Most banks own few fixed assets.
B) Most banks have a high degree of operating leverage.
C) Most banks have few fixed costs.
D) Many bank liabilities are payable on demand.
E) Banks generally operate with less equity capital than non-financial firms.

Question 14

Securities that require unrealized gains or losses to be recorded on the income statement are called:

A) held-to-maturity securities.
B) trading account securities.
C) available-for-sale securities.
D) revenue securities.
E) repurchase agreements

Question 15

The volume of net deferred credit is commonly referred to as:

A) the burden.
B) NOW balances.
C) reserve requirements.
D) equity.
E) float.

Question 16

Jumbo CDs that a bank obtains from a third-party broker are called:

A) money market demand accounts.
B) time deposit accounts.
C) mortgage loans.
D) brokered deposits.
E) core deposits.

Question 17

Which of the following is are only available to non-commercial customers?

A) Money Market Demand Accounts
B) Demand deposit accounts
C) Mortgage loans
D) Negotiable Orders of Withdrawal (NOW) accounts
E) Auto leases

Question 18

The largest component of "non- interest cash and due from banks" is:

A) cash items in process of collection.
B) deposits held at other financial institutions.
C) federal funds sold.
D) vault cash.
E) loans from the Federal Reserve.

Question 19

_________ own(s) the bulk of demand deposit accounts.

A) Consumers
B) Businesses
C) State governments
D) The federal government
E) Non-profits

Question 20

A loan to an individual to purchase a home would be considered a:

A) consumer loan.
B) commercial loan.
C) agricultural loan.
D) construction loan.
E) real estate loan.

Question 21

A change in net interest income would occur when:

A) the composition of the assets of the bank change.
B) the average asset yield changes.
C) the volume of the assets of the bank change.
D) the average interest expense changes.
E) All of the above

Question 22

Non-interest income includes all of the following except:

A) checking account fees.
B) insufficient funds service charges.
C) trust income.
D) personnel expenses.
E) all of the above are considered non-interest income.

Question 23

A bank's "burden" is defined as:

A) net interest income minus non-interest income.
B) non-interest income minus non-interest expense.
C) non-interest expense minus non-interest income.
D) net interest income plus non-interest income.
E) interest expense plus non-interest expense.

Question 24

Non-interest income includes all of the following except:

A) monthly fee income on checking accounts.
B) late fees on loans.
C) trust income.
D) insufficient funds service charges.
E) all of the above are considered non-interest income.

Question 25

Non-interest expenses includes all of the following except:

A) occupancy expenses.
B) goodwill impairment.
C) insufficient funds service charges.
D) personnel expenses.
E) all of the above are considered non-interest expense.

Question 26

Unsecured liabilities created from the exchange of immediately available funds are known as:

A) federal funds purchased.
B) repurchase agreements.
C) federal funds sold.
D) pledged securities.
E) brokered deposits.

Question 27

Which of the following would be the least sensitive to changes in interest rates?

A) Demand deposits
B) Repurchase agreements
C) Federal funds purchased
D) Eurodollar liabilities
E) Jumbo CDs

Question 28

Total operating expense is comparable to _________ for a non-financial firm.

A) sales
B) cost of goods sold + other operating expenses
C) interest expense
D) earnings before taxes
E) net income

Question 29

A bank currently owns a municipal bond paying a tax-exempt rate of 5%. If the banks marginal tax rate is 35%, what is the taxable equivalent yield?

A) 7.69%
B) 3.25%
C) 6.75%
D) 3.70%
E) 9.32%

Question 30

Net income is defined as:

A) Net interest income - burden + provision for loan loss + securities gains or losses - taxes.
B) Net interest income + burden + provision for loan loss + securities gains or losses - taxes.
C) Net interest income - burden - provision for loan loss + securities gains or losses - taxes.
D) Net interest income - burden - provision for loan loss + securities gains or losses + taxes.
E) Net interest income + burden - provision for loan loss + securities gains or losses - taxes.

Question 31

A bank's core deposits are:

A) vault cash.
B) stable deposits that are not typically withdrawn over short periods of time.
C) the bank's deposits at the Federal Reserve.
D) the most interest rate sensitive liabilities of a bank.
E) deposits held in foreign offices.

Question 32

The "provision for loan and lease losses":

A) are the realized losses from the previous accounting period.
B) represents management's estimate of potential lost revenue from bad loans.
C) determined by the Federal Reserve for all banks.
D) does not affect net income.
E) is another name for a bank's "burden."

Question 33

A bank currently owns a municipal bond paying a tax-exempt rate of 6.5%. If the banks marginal tax rate is 40%, what is the taxable equivalent yield?

A) 3.90%
B) 10.83%
C) 9.10%
D) 4.64%
E) 9.32%

Question 34

Core deposits consist of all of the following except:

A) demand deposits.
B) NOW accounts.
C) jumbo certificates of deposit.
D) savings accounts.
E) money market demand accounts.

Question 35

Net interest income is the difference between:

A) gross interest income and net interest expense.
B) gross interest income and non-interest income.
C) the burden and realized gains or losses.
D) non-interest income and net interest expense.
E) gross interest income and gross interest expense.

Question 36

Which of the following is not considered a volatile liability?

A) Jumbo CDs
B) Deposits in foreign offices
C) Repurchase agreements
D) Federal funds sold
E) All of the above are considered volatile liabilities

Question 37

Everything else the same, a bank's "burden" would most likely increase given:

A) a decrease in overhead expenses.
B) an increase in interest rates.
C) a decrease in interest rates.
D) an increase in executive salaries.
E) an increase in service charges collected by the bank.

Question 38

Which of the following would be considered an extraordinary item on an income statement of a bank?

A) Revenue from the sale of the bank's office building.
B) Interest income when the spread is greater than 10%.
C) Realized security gains.
D) Collection on loans already charged off.
E) All of the above would be considered extraordinary items.

Question 39

Total operating income is comparable to _________ for a non-financial firm.

A) sales
B) cost of goods sold
C) gross profit
D) earnings before interest and taxes
E) net income

Question 40

A bank currently owns a municipal bond paying a tax-exempt rate of 8%. If the banks marginal tax rate is 39%, what is the taxable equivalent yield?

A) 11.12%
B) 4.88%
C) 13.11%
D) 5.76%
E) 9.32%

Question 41

What is the return on equity for a bank that has an equity multiplier of 12, an interest expense ratio of 5%, and a return on assets of 1.1%?

A) 5.0%
B) 13.2%
C) 8.2%
D) 26.4%
E) 0.66%

Question 42

What is the equity multiplier for a bank where equity is equal to 10% of total assets?

A) 90.00
B) 10.00
C) 1.10
D) 110.00
E) 1.00

Question 43

Use the following information for questions .
1 st State Bank Balance Sheet Assets
$\begin{array}{lrr}\text { Cash and Due from Banks } & \$ & 50 \\\text { Investments } & \$ & 300 \\\text { Federal Funds } & \$ & 10 \\\text { Loans } & \$ & 350 \\\text { Premises } & \$ & 90\\\text { Average Total Assets }&\$&800\\\\\text { Liabilities \& Equity }\\\text { Demand Deposits } & \$ & 100 \\\text { Time Deposits } & \$ & 300 \\\text { Federal Funds } & \$ & 300 \\\text { Equity } & \$ & 100\\\text { Average Total Liabilities \& Equity }&\$&800\\\\\text { Income Statement }\\\text { Interest Income } & \$ & 100 \\\text { Interest Expense } & \$ & 75 \\\text { Non-Interest Income } & \$ & 5 \\\text { Non-Interest Expense } & \$ & 25\\\text { Net Income }&\$&5\end{array}$

-What is the earnings base at 1^st State?

A) 12.5%
B) 17.5%
C) 58.5%
D) 75.5%
E) 82.5%

Question 44

Use the following information for questions .
1 st State Bank Balance Sheet Assets
$\begin{array}{lrr}\text { Cash and Due from Banks } & \$ & 50 \\\text { Investments } & \$ & 300 \\\text { Federal Funds } & \$ & 10 \\\text { Loans } & \$ & 350 \\\text { Premises } & \$ & 90\\\text { Average Total Assets }&\$&800\\\\\text { Liabilities \& Equity }\\\text { Demand Deposits } & \$ & 100 \\\text { Time Deposits } & \$ & 300 \\\text { Federal Funds } & \$ & 300 \\\text { Equity } & \$ & 100\\\text { Average Total Liabilities \& Equity }&\$&800\\\\\text { Income Statement }\\\text { Interest Income } & \$ & 100 \\\text { Interest Expense } & \$ & 75 \\\text { Non-Interest Income } & \$ & 5 \\\text { Non-Interest Expense } & \$ & 25\\\text { Net Income }&\$&5\end{array}$

-What is 1^st State's return on equity?

A) 0.6%
B) 3.8%
C) 5.0%
D) 8.2%
E) 9.8%

Question 45

A bank's equity multiplier measures the bank's:

A) financial leverage.
B) operating leverage.
C) credit leverage.
D) interest rate exposure.
E) duration gap.

Question 46

Return on assets can be calculated as:

A) return on equity plus the equity multiplier.
B) net interest income divided by earning assets.
C) asset utilization minus the expense ratio and the tax ratio.
D) interest income minus interest expense.
E) earning assets divided by average total assets.

Question 47

What is the equity multiplier for a bank where equity is equal to 8% of total assets?

A) 1.08
B) 8.00
C) 0.92
D) 12.5
E) 1.25

Question 48

A bank that deals primarily with commercial customers is called:

A) an Edge Act bank.
B) a retail bank.
C) a wholesale bank.
D) a uniform bank.
E) a liability bank.

Question 49

The expense ratio is calculated as:

A) total revenue - total operating expenses.
B) total revenue - total operating expenses - taxes.
C) interest expense ratio - non-interest expense ratio - provision for loan loss ratio.
D) asset utilization - expense ratio - tax ratio.
E) interest expense ratio + non-interest expense ratio + provision for loan loss ratio.

Question 50

What is the return on equity for a bank that has an equity multiplier of 9, an interest expense ratio of 6%, and a return on assets of 1.2%?

A) 10.8%
B) 6.0%
C) 8.0%
D) 4.8%
E) 0.65%

Question 51

Use the following information for questions .
1 st State Bank Balance Sheet Assets
$\begin{array}{lrr}\text { Cash and Due from Banks } & \$ & 50 \\\text { Investments } & \$ & 300 \\\text { Federal Funds } & \$ & 10 \\\text { Loans } & \$ & 350 \\\text { Premises } & \$ & 90\\\text { Average Total Assets }&\$&800\\\\\text { Liabilities \& Equity }\\\text { Demand Deposits } & \$ & 100 \\\text { Time Deposits } & \$ & 300 \\\text { Federal Funds } & \$ & 300 \\\text { Equity } & \$ & 100\\\text { Average Total Liabilities \& Equity }&\$&800\\\\\text { Income Statement }\\\text { Interest Income } & \$ & 100 \\\text { Interest Expense } & \$ & 75 \\\text { Non-Interest Income } & \$ & 5 \\\text { Non-Interest Expense } & \$ & 25\\\text { Net Income }&\$&5\end{array}$

-What is 1^st State's efficiency ratio?

A) 2.53%
B) 17.51%
C) 0.83%
D) 0.45%
E) 83.3%

Question 52

Relative to wholesale banks, retail banks:

A) focus on individual consumer banking relationships.
B) operate with fewer consumer deposits.
C) purchase more non-core liabilities.
D) hold proportionally more business loans to large firms.
E) All of the above.

Question 53

Net income is calculated as:

A) total revenue - total operating expenses.
B) total revenue - total operating expenses - taxes.
C) asset utilization - expense ratio.
D) asset utilization - expense ratio - tax ratio.
E) interest expense ratio - non-interest expense ratio - provision for loan loss ratio.

Question 54

Relative to retail banks, wholesale banks:

A) deal primarily with consumers.
B) operate with fewer commercial deposits.
C) purchase more non-core liabilities.
D) hold proportionally more consumer loans.
E) All of the above.

Question 55

Use the following information for questions
1 st State Bank Balance Sheet Assets
$\begin{array}{lrr}\text { Cash and Due from Banks } & \$ & 75 \\\text { Investments } & \$ & 400 \\\text { Federal Funds } & \$ & 18 \\\text { Loans } & \$ & 402 \\\text { Premises } & \$ & 105\\\text { Average Total Assets }&\$&1,000\\\\\text { Liabilities \& Equity }\\\text { Demand Deposits } & \$ & 150 \\\text { Time Deposits } & \$ & 325 \\\text { Federal Funds } & \$ & 425 \\\text { Equity } & \$ & 100\\\text { Average Total Liabilities \& Equity }&\$&1,000\\\\\text { Income Statement }\\\text { Interest Income } & \$ & 150 \\\text { Interest Expense } & \$ & 110 \\\text { Non-Interest Income } & \$ & 11 \\\text { Non-Interest Expense } & \$ &38\\\text { Net Income }&\$&13\end{array}$

-What is 1^st State's return on equity?

A) 0.6%
B) 3.8%
C) 5.0%
D) 8.2%
E) 13.0%

Question 56

Use the following information for questions .
1 st State Bank Balance Sheet Assets
$\begin{array}{lrr}\text { Cash and Due from Banks } & \$ & 50 \\\text { Investments } & \$ & 300 \\\text { Federal Funds } & \$ & 10 \\\text { Loans } & \$ & 350 \\\text { Premises } & \$ & 90\\\text { Average Total Assets }&\$&800\\\\\text { Liabilities \& Equity }\\\text { Demand Deposits } & \$ & 100 \\\text { Time Deposits } & \$ & 300 \\\text { Federal Funds } & \$ & 300 \\\text { Equity } & \$ & 100\\\text { Average Total Liabilities \& Equity }&\$&800\\\\\text { Income Statement }\\\text { Interest Income } & \$ & 100 \\\text { Interest Expense } & \$ & 75 \\\text { Non-Interest Income } & \$ & 5 \\\text { Non-Interest Expense } & \$ & 25\\\text { Net Income }&\$&5\end{array}$

-What is 1^st State's burden ratio?

A) 2.5%
B) 17.5%
C) 25.0%
D) 75.5%
E) 82.5%

Question 57

Return on equity can be decomposed into:

A) the sum of return on assets and the equity multiplier.
B) the product of return on assets and the equity multiplier.
C) the product of the profit margin and the equity multiplier.
D) the sum of the profit margin and the equity multiplier.
E) the sum of the profit margin, equity multiplier, and the interest ratio.

Question 58

What is the return on equity for a bank that has an equity multiplier of 14, an interest expense ratio of 4%, and a return on assets of .9%?

A) 1.3%
B) 4.0%
C) 9.0%
D) 12.6%
E) 8.6%

Question 59

Use the following information for questions .
1 st State Bank Balance Sheet Assets
$\begin{array}{lrr}\text { Cash and Due from Banks } & \$ & 50 \\\text { Investments } & \$ & 300 \\\text { Federal Funds } & \$ & 10 \\\text { Loans } & \$ & 350 \\\text { Premises } & \$ & 90\\\text { Average Total Assets }&\$&800\\\\\text { Liabilities \& Equity }\\\text { Demand Deposits } & \$ & 100 \\\text { Time Deposits } & \$ & 300 \\\text { Federal Funds } & \$ & 300 \\\text { Equity } & \$ & 100\\\text { Average Total Liabilities \& Equity }&\$&800\\\\\text { Income Statement }\\\text { Interest Income } & \$ & 100 \\\text { Interest Expense } & \$ & 75 \\\text { Non-Interest Income } & \$ & 5 \\\text { Non-Interest Expense } & \$ & 25\\\text { Net Income }&\$&5\end{array}$

-What is 1^st State's net interest margin?

A) 0.6%
B) 3.8%
C) 5.0%
D) 8.2%
E) 9.8%

Question 60

What is the equity multiplier for a bank where equity is equal to 12% of total assets?

A) 83.33
B) 1.12
C) 0.88
D) 12.00
E) 8.33

Question 61

Which of the following is not one of the risks identified by the Federal Reserve Board?

A) Credit risk
B) Market risk
C) Ownership risk
D) Reputation risk
E) Legal risk

Question 62

Which of the following is not part of the CAMELS ratings?

A) Capital adequacy.
B) Asset quality.
C) Earnings quality.
D) Liabilities quality.
E) Sensitivity to market risk.

Question 63

A savings and loan that sold off their junk bond holdings and issued consumer auto loans with the proceed would most likely be:

A) decreasing their market risk.
B) increasing their capital risk.
C) decreasing their legal risk.
D) increasing their operating risk.
E) reducing their credit risk.

Question 64

Use the following information for questions
1 st State Bank Balance Sheet Assets
$\begin{array}{lrr}\text { Cash and Due from Banks } & \$ & 75 \\\text { Investments } & \$ & 400 \\\text { Federal Funds } & \$ & 18 \\\text { Loans } & \$ & 402 \\\text { Premises } & \$ & 105\\\text { Average Total Assets }&\$&1,000\\\\\text { Liabilities \& Equity }\\\text { Demand Deposits } & \$ & 150 \\\text { Time Deposits } & \$ & 325 \\\text { Federal Funds } & \$ & 425 \\\text { Equity } & \$ & 100\\\text { Average Total Liabilities \& Equity }&\$&1,000\\\\\text { Income Statement }\\\text { Interest Income } & \$ & 150 \\\text { Interest Expense } & \$ & 110 \\\text { Non-Interest Income } & \$ & 11 \\\text { Non-Interest Expense } & \$ &38\\\text { Net Income }&\$&13\end{array}$

-What is the earnings base at 1^st State?

A) 12.5%
B) 17.0%
C) 58.5%
D) 75.5%
E) 82.0%

Question 65

In the CAMELS ratings, which reflects the bank's off-balance sheet activities?

A) Capital adequacy
B) Asset quality
C) Earnings quality
D) Liquidity
E) Sensitivity to market risk

Question 66

The goal of a bank manager should be:

A) to maximize earnings.
B) to minimize taxes.
C) to minimize risk.
D) to maximize shareholder wealth.
E) to maximize net interest income.

Question 67

Total revenue is the same as total operating income.

Question 68

The efficiency ratio measures:

A) a bank's ability to control interest expense.
B) a bank's ability to control non-interest expense.
C) a bank's spread.
D) a bank's burden.
E) a bank's operating leverage.

Question 69

Use the following information for questions
1 st State Bank Balance Sheet Assets
$\begin{array}{lrr}\text { Cash and Due from Banks } & \$ & 75 \\\text { Investments } & \$ & 400 \\\text { Federal Funds } & \$ & 18 \\\text { Loans } & \$ & 402 \\\text { Premises } & \$ & 105\\\text { Average Total Assets }&\$&1,000\\\\\text { Liabilities \& Equity }\\\text { Demand Deposits } & \$ & 150 \\\text { Time Deposits } & \$ & 325 \\\text { Federal Funds } & \$ & 425 \\\text { Equity } & \$ & 100\\\text { Average Total Liabilities \& Equity }&\$&1,000\\\\\text { Income Statement }\\\text { Interest Income } & \$ & 150 \\\text { Interest Expense } & \$ & 110 \\\text { Non-Interest Income } & \$ & 11 \\\text { Non-Interest Expense } & \$ &38\\\text { Net Income }&\$&13\end{array}$

-What is 1^st State's efficiency ratio?

A) 2.5%
B) 17.5%
C) 25.0%
D) 74.5%
E) 82.5%

Question 70

Which of the following would not be considered an earning asset?

A) Cash due from banks
B) Municipal securities
C) Treasury bills
D) Repurchase agreements
E) Mortgages

Question 71

The risk that a bank cannot meet payment obligations in a timely and cost-effective manner is known as:

A) credit risk.
B) capital risk.
C) market risk.
D) operating risk.
E) liquidity risk.

Question 72

Use the following information for questions
1 st State Bank Balance Sheet Assets
$\begin{array}{lrr}\text { Cash and Due from Banks } & \$ & 75 \\\text { Investments } & \$ & 400 \\\text { Federal Funds } & \$ & 18 \\\text { Loans } & \$ & 402 \\\text { Premises } & \$ & 105\\\text { Average Total Assets }&\$&1,000\\\\\text { Liabilities \& Equity }\\\text { Demand Deposits } & \$ & 150 \\\text { Time Deposits } & \$ & 325 \\\text { Federal Funds } & \$ & 425 \\\text { Equity } & \$ & 100\\\text { Average Total Liabilities \& Equity }&\$&1,000\\\\\text { Income Statement }\\\text { Interest Income } & \$ & 150 \\\text { Interest Expense } & \$ & 110 \\\text { Non-Interest Income } & \$ & 11 \\\text { Non-Interest Expense } & \$ &38\\\text { Net Income }&\$&13\end{array}$

-What is 1^st State's burden ratio?

A) 2.7%
B) 17.5%
C) 25.0%
D) 75.5%
E) 82.5%

Question 73

Use the following information for questions
1 st State Bank Balance Sheet Assets
$\begin{array}{lrr}\text { Cash and Due from Banks } & \$ & 75 \\\text { Investments } & \$ & 400 \\\text { Federal Funds } & \$ & 18 \\\text { Loans } & \$ & 402 \\\text { Premises } & \$ & 105\\\text { Average Total Assets }&\$&1,000\\\\\text { Liabilities \& Equity }\\\text { Demand Deposits } & \$ & 150 \\\text { Time Deposits } & \$ & 325 \\\text { Federal Funds } & \$ & 425 \\\text { Equity } & \$ & 100\\\text { Average Total Liabilities \& Equity }&\$&1,000\\\\\text { Income Statement }\\\text { Interest Income } & \$ & 150 \\\text { Interest Expense } & \$ & 110 \\\text { Non-Interest Income } & \$ & 11 \\\text { Non-Interest Expense } & \$ &38\\\text { Net Income }&\$&13\end{array}$

-What is 1^st State's net interest margin?

A) 0.6%
B) 3.8%
C) 4.9%
D) 8.2%
E) 9.8%

Question 74

Retail banks deal primarily with commercial customers.

Question 75

Classified loans:

A) still accrue interest.
B) have not had a principle or interest payment made in 90 days.
C) exactly offset gross charge-offs.
D) are loans in which regulators have forced management to set aside reserves.
E) all of the above

Question 76

Which of the following is not a techniques that banks use to "manage earnings"?

A) Window dressing
B) Nonrecurring sales of assets
C) Adjusting the allowance for loan losses
D) Increasing loans classified as non-performing
E) All of the above are techniques that banks use to "manage earnings"

Question 77

Which type of risk is the most difficult to quantify?

A) Credit risk
B) Liquidity risk
C) Legal risk
D) Operating risk
E) Market risk

Question 78

Subordinated bank debt is federally insured.

Question 79

Recoveries refer to:

A) the dollar value of loans actually written off as uncollectible.
B) the dollar amount of loans that were previously charged-off but now collected.
C) net charge-offs.
D) loans not currently accruing interest.
E) loans that regulators have required the bank to "recover".

Question 80

All of the following are examples of operational risk except:

A) fraud.
B) compromised security data.
C) theft.
D) business interruptions.
E) default on a loan.