Financial Statement Analysis Case Union Planters Union Planters is a bank holding company (that is, a corporation that owns banks). Union Planters manages \($32\) billion in assets, the largest of which is its loan portfolio of \($19\) billion. In addition to its loan portfolio, however, like other banks it has significant debt investments. These investments vary from shortterm to long-term in nature. As a consequence, consistent with the requirements of accounting rules, Union Planters reports both the fair value and amortized cost of its investments. The following facts were found in a recent Union Planters’ annual report.

Instructions

(a) Why do you suppose Union Planters purchases investments, rather than simply making loans?
Why does it purchase investments that vary both in terms of their maturities and in type (debt versus equity)?

(b) How must Union Planters account for its investments at fair value and amortized cost?

(c) In what ways does classifying investments into two different categories assist investors in evaluating the profitability of a company like Union Planters?

(d) Could Union Planters adjust its investment portfolio to increase reported profit? If so, how much could it have increased reported profit? Why do you suppose it chose not to do this?

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Trading account assets (amounts in millions) Non-trading equity investments Net income Net investment gains (losses) Amortized Gross Unrealized Cost Gains Gross Unrealized Losses Fair Value $ 275 - 8,209 $108 $15 $ 275 8,302 224 (9)