Pro Forma
FINANCIAL STATEMENT OVERVIEW
ASSIGNMENT # 3
Members: Zhishuang Liu Siyi Shang Qihui Wu Anqi Li
Context
1 Assumptions
(1) Interest Income grows at a certain rate every year.
(2) There is no issue of new shares
(3) There are tendencies of the ratios, such as net interest income margin, net income margin, return on asset, return on equity, etc., that could be used for forecasting.
(4) Simplify the accounts of Balance Sheet, Income Statement and Cash Flow Statement.
2. I/S Pro Forma
1.1 Interest Income
Graph 2-1 Interest Income
Graph 2-1 shows the total interest income of Orrstown from year 2006-2013. As it takes a longer time for small financial institutions to react on the financial crisis, the negative interest income of orrstown showed in year 2012 and 2013. Because there would be little chance of any big financial crisis in the following five years, it is reasonable to take outliers. Take the average of the annual growth rate of total interest income from 2006 to 2011, and use it as the annual growth rate of total interest income for the nest five years.
1.2 Net Interest Income Margin
Graph 2.2 Net Interest Income Margin
As is shown on Graph 2.2, the net interest income margin grew steadily from 2006-2013. Get the geometric average and Use the result as the predictor of net interest income margin for year 2014-2018.
According to the predictive values of interest income and net interest income margin, get the values of net interest income (interest income* net interest income margin) and interest expense (interest income- net interest income).
Graph 2.3 Int and Fee on Loans/ Int Income
Graph 2.4 Sub-accounts/ Int Income
Graph 2.5 Interest on deposits/ Interest Expense
Graph 2.6 Sub-accounts/ Interest Expense
Based on Graph 2-3 – Graph 2-6, consult proportions of each sub-account of interest income and interest expense in the past years and get the
ASSIGNMENT # 3
Members: Zhishuang Liu Siyi Shang Qihui Wu Anqi Li
Context
1 Assumptions
(1) Interest Income grows at a certain rate every year.
(2) There is no issue of new shares
(3) There are tendencies of the ratios, such as net interest income margin, net income margin, return on asset, return on equity, etc., that could be used for forecasting.
(4) Simplify the accounts of Balance Sheet, Income Statement and Cash Flow Statement.
2. I/S Pro Forma
1.1 Interest Income
Graph 2-1 Interest Income
Graph 2-1 shows the total interest income of Orrstown from year 2006-2013. As it takes a longer time for small financial institutions to react on the financial crisis, the negative interest income of orrstown showed in year 2012 and 2013. Because there would be little chance of any big financial crisis in the following five years, it is reasonable to take outliers. Take the average of the annual growth rate of total interest income from 2006 to 2011, and use it as the annual growth rate of total interest income for the nest five years.
1.2 Net Interest Income Margin
Graph 2.2 Net Interest Income Margin
As is shown on Graph 2.2, the net interest income margin grew steadily from 2006-2013. Get the geometric average and Use the result as the predictor of net interest income margin for year 2014-2018.
According to the predictive values of interest income and net interest income margin, get the values of net interest income (interest income* net interest income margin) and interest expense (interest income- net interest income).
Graph 2.3 Int and Fee on Loans/ Int Income
Graph 2.4 Sub-accounts/ Int Income
Graph 2.5 Interest on deposits/ Interest Expense
Graph 2.6 Sub-accounts/ Interest Expense
Based on Graph 2-3 – Graph 2-6, consult proportions of each sub-account of interest income and interest expense in the past years and get the