Banking Quiz Chapter 2

Bank assets fall into each of the following categories except:

• Loans.

• Investment securities.

• Demand deposits.

• Noninterest cash and due from banks.

• Other assets.

Banks generate their largest portion of income from:

• Loans.

• Short-term investment.

• Demand deposits.

• Long-term investments.

• Certificates of deposit.

Loans typically fall into each of the following categories except:

• Real estate.

• Consumer.

• Commercial and Industrial (business).

• Agricultural.

• Municipal.

Which of the following adjustments are made to gross loans and leases to obtain net loans and leases?

• The loan and lease loss allowance is subtracted from gross loans

• Unearned income is subtracted from gross interest received

• Investment income is added to gross interest received

• A and B.

• A. and C.

An example of a contra-asset account is:

• The loan and lease loss allowance.

• Unearned income.

• Buildings and equipment.

• Revenue bonds.

• The provision for loan loss.

The noncash expense item on a bank's Report of Income designed to shelter a bank's current earnings from taxes and to help prepare for bad loans is called:

• Short-term debt interest

• Noninterest expense

• Provision for taxes

• Provision for possible loan losses

• None of the above.

A financial institution's bad-debt reserve, as reported on its balance sheet, is called:

• Unearned income or discount

• Allowance for possible loan losses

• Intangible assets

• Customer liability on acceptances

• None of the above

When a bank serves as a security dealer for certain kinds of securities (mainly federal, state, and local government obligations) the value of these securities is usually recorded in what account on a bank's Report of Condition?

• Investment Securities

• Taxable and Tax-Exempt Securities

• Trading Account Securities

• Secondary Reserves

• None of the above

The difference between noninterest income and noninterest expenses on a bank's Report of Income is called:

• Net Profit Margin

• Net Interest Income

• Net Income After Provision for Possible Loan Losses

• Income or Loss Before Income Taxes

• Net Noninterest Income

The account that is built up by annual noncash expense deductions and is subtracted from Gross Loans on the Report of Condition is:

• Unearned income

• Nonperforming loans

• Allocated loan risk deductions

• Allowance for possible loan losses

• None of the above.