Tompkins Financial Corporation, a multibank holding company headquartered in Ithaca, New York, reported the following changes in the company’s Allowance for Loan and Lease Losses account as of December 31, 2011 ($ in thousands):
2011 _
Reserve at beginning of year ......... $27,832
Provisions charged to operations ........ 8,945
Recoveries on loans and leases ......... 1,048
Loans and leases charged off ......... (10,232)
Reserve at end of year ............. $27,593
1. Terminology in bank financial statements sometimes differs slightly from that in statements of industrial companies. Explain what is meant by “allowance for loan and lease losses,” “provisions charged to operations,” and “loans and leases charged off.”
2. Prepare the 2011 journal entries to record the writing off of specific credit losses, the recovery of previously written-off credit losses, and the charge for credit losses against 2011 income. Omit explanations.
3. Suppose the bank analyzed its loans at the end of 2011 and decided that an allowance for loan and lease losses equal to $30 million was required. Compute the provision that would be charged in 2011.
4. The bank had income before income taxes of $51,923,000 in 2011. Compute the income before income taxes if the reserve for loan and lease losses at the end of 2011 had been $30 million.

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