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Suncoast

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Submitted By turboman
Words 1657
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Sun Coast Savings Bank was founded in l97l in Safety Harbor, Florida, which is just across the bay from Tampa. Safety Harbor is very popular with people who work in Tampa but do not wish to live within the city itself. Per-capital income in SafetyH arbor is substantially above the national average; in fact, the town has a reputation for having the greatest population of BMWs and
Mercedes Benzes per capita in the United States. The combination of an increasing population, high per capita income and a huge demand for funds to finance new home construction has made
Sun Coast the fastest-growing association in the state in terms of both assets and earnings.

Although Sun Coast is very profitable and has experienced rapid growth in earnings, the company's quick expansion has put it under severe financial strain. Even though all earnings have been retained, the net-worth-to-assets ratio has been declining to the extent that, by 2000, it was just above the minimum required by federal regulations(see T able l).

Table 1

Sun Coast Savings Bank
Balance Sheet for Year Ended December 31, 2000

Assets Cash & Marketable Securities $83,441,700 Mortgage Loan 815,235,000 Fixed Assets 60,423,300 Total Assets $959,100,000

Liabilities Savings Account $817,153,200 Other Liabilities 83,077,000 Capital Stock ($100 par value) 900,000 Retained Earnings 57,969,800 Total Claims $959,100,000

***Note: Federal law requires the ratio of capital plus retained earnings-to-assets to be at least 6%.

Sun Coast now has the opportunity to open a branch office in a new shopping center. If the office is opened, it will bring in profitable new loans and deposits, further increasing the company’s growth. However, an inflow of deposits at the present time would cause the net-worth-to-assets ratio to fall below

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