Two depository institutions have composite CAMELS ratings of 1 or 2 and are "well capitalized." Thus, each institution falls into the FDIC Risk Category I deposit insurance assessment scheme. Further, the institutions have the following financial ratios and CAMELS ratings: Use Table 13–11. Institution AInstitution BTier I leverage ratio (%) 8.80 7.93 Net income before taxes/risk-weighted assets (%) 2.33 1.95 Nonperforming loans and leases/gross assets (%) 0.53 0.68 Other real estate owned/gross assets (%) 0.15 0.45 Brokered deposits/total assets (%) 3.75 1.05 One year asset growth 7.35 4.65 Loans as a Percentage of Total Assets: Construction & Development 0.00 0.00 Commercial & Industrial 18.36 11.40 Leases 2.05 1.75 Other Consumer 18.85 18.55 Loans to Foreign Government 0.30 0.30 Real Estate Loans Residual 0.00 0.00 Multifamily Residential 0.95 0.65 Nonfarm Nonresidential 0.00 0.00 1–4 Family Residential 38.40 36.34 Loans to Depository Banks 2.70 0.95 Agricultural Real Estate 1.30 4.05 Agricultural 0.40 7.20 CAMELS components: C 2 2 A 2 3 M 1 2 E 2 2 L 1 3 S 2 1 The DIF reserve ratio is currently 1.30 percent. Calculate the initial deposit insurance assessment rate for each institution. TABLE 13–11 CAMELS Component WeightsCAMELS ComponentWeightC25%A20M25E1010S10Source: FDIC, Federal Register, May 20, 2016. www.fdic.gov

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Answered: TABLE 13–11 CAMELS Component Weights…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Two depository institutions have composite CAMELS ratings of 1 or 2 and are "well capitalized." Thus, each institution falls into the FDIC Risk Category I deposit insurance assessment scheme. Further, the institutions have the following financial ratios and CAMELS ratings: Use Table 13–11.

	Institution A	Institution B
Tier I leverage ratio (%)		8.80	7.93
Net income before taxes/risk-weighted assets (%)		2.33	1.95
Nonperforming loans and leases/gross assets (%)		0.53	0.68
Other real estate owned/gross assets (%)		0.15	0.45
Brokered deposits/total assets (%)		3.75	1.05
One year asset growth		7.35	4.65

Loans as a Percentage of Total Assets:
Construction & Development		0.00	0.00
Commercial & Industrial		18.36	11.40
Leases		2.05	1.75
Other Consumer		18.85	18.55
Loans to Foreign Government		0.30	0.30
Real Estate Loans Residual		0.00	0.00
Multifamily Residential		0.95	0.65
Nonfarm Nonresidential		0.00	0.00
1–4 Family Residential		38.40	36.34
Loans to Depository Banks		2.70	0.95
Agricultural Real Estate		1.30	4.05
Agricultural		0.40	7.20

CAMELS components:
C		2	2
A		2	3
M		1	2
E		2	2
L		1	3
S		2	1

The DIF reserve ratio is currently 1.30 percent. Calculate the initial deposit insurance assessment rate for each institution.

TABLE 13–11 CAMELS Component Weights
CAMELS Component
Weight
C
25%
A
20
M
25
E
10
10
S
10
Source: FDIC, Federal Register, May 20, 2016. www.fdic.gov

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