a. Forecast Hawaii Bank's net interest margin.

b. Forecast Hawaii Bank's earnings before taxes as a percentage of assets.

c. Forecast Hawaii Bank's earnings after taxes as a percentage of assets.

d. Forecast Hawaii Bank's return on equity.

e. Hawaii Bank is considering a shift in its asset structure to reduce its concentration of Treasury bonds and increase its volume of loans to small businesses. Identify each income statement item that would be affected by this strategy, and explain whether the forecast for that item would increase or decrease as a result.

As a manager of Hawaii Bank, you anticipate the following information provided to you:

• Loan loss reserves at end of year = 1 percent of assets

• Gross interest income over the next year = 9 percent of assets

• Noninterest expenses over the next year = 3 percent of assets

• Noninterest income over the next year = 1 percent of assets

• Gross interest expenses over the next year = 5 percent of assets

• Tax rate on income = 30 percent

• Capital ratio (capital/assets) at end of year = 5 percent