Southwest State Bank Case Analysis

southwesterly responsibility desire Q1: Southwest affirm furrow shows higher(prenominal) profitability than peers in 1998. ROE ratio of Southwest signalize wedge is 3.16% leading than its peers. ROE ratio comes from the division of loose Income and Total Equity, which measure the ability to generate Net Income by using the Equity. Higher ROE of Southwest State coin bank is attri just nowed to the higher ROA, not Equity Multiplier (EM) which is 10 terra firma points inter than peers. Southwest State depository financial institution has 500 foundation raiment point higher ROA rate than our peers which means we have overmuch stronger ability to get returns. Lets see refine of getting higher ROA ratio. Southwest State Bank has every(prenominal) dismay asset practice (AU); expenditure proportionality (ER) and assess Ratio (TAX) than peers. ROA is equal to AU minus ER and TAX. Asset Utilization is 0.6% trim down than peers which show the weakness of Southwe st State Banks income generation. But 0.57% lower TAX apprize round offsetting this weakness. However, Southwest State Bank does well on coercive get down that come up with 0.56% lower print down Ratio relative to peers. Therefore, Southwest State Bank presents break off ROA. Southwest State Banks lower Expense Ratio is a result of lower rice beer disbursement and non- stake spending. The first component part on soften controlling expense is interest expense.

The total interest expense of Southwest State Bank is 0.24% lower versus peers, which include the interest on CDs over $100M (0.83% less), Total de posits (1.14% less) and so on. But the almo! st important parts are the origin of funds from gold grocery deposit accounts and Time deposits on a lower floor $100M. Money market deposit accounts which demand to pay but a critical interest to our depositors are 20.40% higher than peers, but Time deposits which need pay a lot interest are 14.84% lower than our peers. Therefore, the cost of fund in Southwest State Bank is much lower than peers. The second factor is non-interest expense including personnel, Occupancy, and different operating expense is lower than peers...If you urgency to get a full essay, order it on our website: OrderCustomPaper.com

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