Plains National Bank has interest income of $250 million and interest expense of $110 million,noninterest income of $40 million and noninterest expense of $65 million on earning assets of $3,900 million. What is Plains' overhead efficiency ratio?

Question

Quizplus · Accepted Answer

The overhead efficiency ratio is calculated as noninterest expense divided by the sum of net interest income and noninterest income. Net interest income is interest income minus interest expense. So, net interest income = $250 million - $110 million = $140 million. The sum of net interest income and noninterest income = $140 million + $40 million = $180 million. The overhead efficiency ratio = noninterest expense / (net interest income + noninterest income) = $65 million / $180 million = 0.3611 or 36.11%. However, given the options provided, it seems there might have been a misunderstanding in the calculation or the options provided. Re-evaluating for the correct approach: Overhead efficiency ratio = (Noninterest Expense / (Interest Income - Interest Expense + Noninterest Income)) * 100 = ($65 million / ($250 million - $110 million + $40 million)) * 100 = ($65 million / $180 million) * 100 = 36.11%. None of the provided options match this calculation, suggesting a possible error in the question or in the interpretation of the options. Given the discrepancy, the correct approach to calculate the overhead efficiency ratio was demonstrated, but the options do not align with the calculated result.

Plains National Bank Has Interest Income of $250 Million and Interest