CBA Financial Reporting & Analysis 3

Question 1

In a bank's call report (FFIEC 041), which schedule captures loan-level data on past due and nonaccrual loans?

Accepted Answer

Schedule RC-N (Past Due and Nonaccrual)

Answer

Schedule RC-N of the call report specifically captures loans, leases, and debt securities categorized by days past due and nonaccrual status.

Question 2

A bank reports a loan-to-deposit ratio (LDR) of 115%. Which risk does this elevated ratio PRIMARILY signal?

Accepted Answer

Liquidity risk from over-reliance on borrowed funds

Answer

An LDR above 100% means the bank has lent out more than it holds in deposits, indicating heavy reliance on wholesale or borrowed funding and heightened liquidity risk.

Question 3

Under ASC 842, how does a bank lessee classify a lease where it obtains substantially all economic benefits and controls the asset's use?

Accepted Answer

Finance lease recognized as right-of-use asset and liability

Answer

A lease meeting finance lease criteria under ASC 842 is recognized as a right-of-use asset and corresponding liability on the balance sheet, with interest and amortization expense recognized separately.

Question 4

Which component of regulatory capital is subject to the most stringent deductions under Basel III, including deductions for deferred tax assets and goodwill?

Accepted Answer

Common Equity Tier 1 (CET1)

Answer

Basel III requires the most conservative deductions—including goodwill, intangibles, deferred tax assets, and certain investments—to be applied against CET1, the highest-quality regulatory capital.

Question 5

A bank's return on assets (ROA) is 0.85% while its return on equity (ROE) is 12.5%. The difference is primarily driven by:

Accepted Answer

Financial leverage (equity multiplier)

Answer

The DuPont relationship ROE = ROA × (Assets/Equity) shows that the equity multiplier (leverage) amplifies ROA into the higher ROE figure.

(CBA) Certified Bank Auditor Practice Test

(CBA) Certified Bank Auditor Practice Test

CBA Financial Reporting & Analysis 3