National Bank has the following balance sheet (in millions) and has no off-balance-sheet activities.
(See attached file for full problem description)
Assets Liabilities and Equity
Cash $20 Deposits $980
Treasury bills 40 Subordinated debentures 40
Residential mortgage 600 Common Stock 40
Other loans 430 Retained earnings 30
Total assets $1,090 Total liabilities and equity $1,090
a) What is the leverage ratio?
b) What is the Tier I capital ratio?
c) What is the total risk-based capital ratio?
d) In what capital category would the bank be placed?
This solution shows step-by-step calculations to determine the leverage ratio, Tier I capital ration, total risk-based capital ratio, and also what capital category the bank will be placed in.