UCE (OCC) QOTD PRACTICE EXAM
QUESTIONS AND ANSWERS COMPLETE
AND 100% VERIFIED.
Currently, ABC Company's inventory is $900 thousand. The company
reported average inventory of $1,235 thousand and cost of goods sold at
$2,173 thousand. What is the inventory turnover ratio?
a) 0.41
b) 0.57
c) 1.76
d) 2.41
Verified Answer -C- 1.76 times: COGS of $2,173 divided by average
inventory of 1.76 times. Inventory turnover measures how many times a
business is able to turn inventory during the year and is calculated as
COGS/Avg. Inv. A high rate is desirable. See Asset-Based Lending
Handbook pg. 10
Which of the following are true in regards to national banks? Choose all
that apply.
I. A national bank may not hold real estate in a subsidiary
II. A national bank may act as a general insurance agent if certain
requirements are met
III. A national bank may maintain and operate a postal substation
IV. A national bank may not prepare income tax returns for customers
Verified Answer -II and III. A national bank may organize a bank premises
subsidiary and may prepare income tax returns for customers free or a fee.
While a national bank may act as an insurance agent, it may only do so in
,offices that are located in a location with a population that does not
exceed 5,000. See 12 CFR 7.
Generally, which of the following are classified as "other assets" on the
call report? Choose all that apply.
I. Net deferred tax asset
II. Accrued interest receivable
III. Prepaid expenses
IV. Bank-owned life insurance
Verified Answer -All of the above are considered other assets on the call
report. See Call Report Instructions
Which of the following is not a minimum appraisal standard?
a) Conform to generally accepted appraisal standards (USPAP)
b) Be written and contain sufficient information and analysis to support
decision
c) Contain all three approaches to value
d) Be performed by a state certified or licensed appraiser
Verified Answer -C- contain all three approaches to value. The appraisal
should use the best approach to value for the individual property. See 12
CFR 34.44 and OCC Bulletin 2010-42 Section VIII
True or False:
While extensions of credit to individual insiders are subject to standard
legal lending limits, the aggregate limit of all insider loans is limited to
150% of capital.
Verified Answer -False. The aggregate lending limit for insiders cannot
exceed 100% of capital and surplus. There is an exception for banks with
,deposits <$100MM, which the aggregate limit can be increased to 200%
of capital and surplus. See 12 CFR 215.4
Which of the following forecasting tools would a bank typically use in
order to measure longer-term interest rate risk, in addition to capturing
option risk?
a) Gap report
b) Sources and uses funds report
c) Earnings-at-risk simulation model
d) Economic value of equity simulation model
Verified Answer -D. EVE Model. While earnings-at-risk simulations
typically span 12- and 24-month horizons. EVE models are able to capture
a broader spectrum of maturities. Also, management can account for
options risk with assumptions. See Interest Rate Risk Handbook, Appendix
E
True or False:
First National Bank's BSA program provides for a system of internal
controls, independent testing, and designates an individual as BSA officer.
Based on this information alone, we can ascertain that the program is
effective and meets regulatory requirements.
Verified Answer -False. The four pillars of a BSA program include internal
controls, independent testing, BSA officer, and employee training. In
addition, the program/policy should be written, approved by the Board
annually, and notated in the minutes. See 12 CFR 21.21
North Bank, N.A. has historically had well-developed funds management
practices and access to funding sources on favorable terms. The last
, Canary report indicated more than sufficient on-hand liquidity. Based on
these facts, what is the most likely component rating?
A) 1
B) 2
C) 3
D) 4
Verified Answer -A- "1" A rating of "1" indicates strong liquidity levels
and well-developed funds management practices. The institution has
reliable access to sufficient sources of funds on favorable terms to meet
present and anticipated liquidity needs. See Bank Supervision Process
Handbook, page 52.
On the UBPR, which of the following criteria is used to define all
commercial bank peer groups?
a) asset size
b) number of banking offices
c) asset mix
d) location
Verified Answer -a-asset size. The UBPR breaks banks into 15 peer groups
and a De Novo group. All banks are grouped by assets, which are then
further stratified between number of banking offices and locations for
smaller asset sizes. For peer group purposes, banks with assets of more
than $300 million are not segregated by the number of offices or location.
While the de novo is grouped by years, they are subject to a $750MM
asset limitation. See UBPR User's Guide Page II-2
True or False:
QUESTIONS AND ANSWERS COMPLETE
AND 100% VERIFIED.
Currently, ABC Company's inventory is $900 thousand. The company
reported average inventory of $1,235 thousand and cost of goods sold at
$2,173 thousand. What is the inventory turnover ratio?
a) 0.41
b) 0.57
c) 1.76
d) 2.41
Verified Answer -C- 1.76 times: COGS of $2,173 divided by average
inventory of 1.76 times. Inventory turnover measures how many times a
business is able to turn inventory during the year and is calculated as
COGS/Avg. Inv. A high rate is desirable. See Asset-Based Lending
Handbook pg. 10
Which of the following are true in regards to national banks? Choose all
that apply.
I. A national bank may not hold real estate in a subsidiary
II. A national bank may act as a general insurance agent if certain
requirements are met
III. A national bank may maintain and operate a postal substation
IV. A national bank may not prepare income tax returns for customers
Verified Answer -II and III. A national bank may organize a bank premises
subsidiary and may prepare income tax returns for customers free or a fee.
While a national bank may act as an insurance agent, it may only do so in
,offices that are located in a location with a population that does not
exceed 5,000. See 12 CFR 7.
Generally, which of the following are classified as "other assets" on the
call report? Choose all that apply.
I. Net deferred tax asset
II. Accrued interest receivable
III. Prepaid expenses
IV. Bank-owned life insurance
Verified Answer -All of the above are considered other assets on the call
report. See Call Report Instructions
Which of the following is not a minimum appraisal standard?
a) Conform to generally accepted appraisal standards (USPAP)
b) Be written and contain sufficient information and analysis to support
decision
c) Contain all three approaches to value
d) Be performed by a state certified or licensed appraiser
Verified Answer -C- contain all three approaches to value. The appraisal
should use the best approach to value for the individual property. See 12
CFR 34.44 and OCC Bulletin 2010-42 Section VIII
True or False:
While extensions of credit to individual insiders are subject to standard
legal lending limits, the aggregate limit of all insider loans is limited to
150% of capital.
Verified Answer -False. The aggregate lending limit for insiders cannot
exceed 100% of capital and surplus. There is an exception for banks with
,deposits <$100MM, which the aggregate limit can be increased to 200%
of capital and surplus. See 12 CFR 215.4
Which of the following forecasting tools would a bank typically use in
order to measure longer-term interest rate risk, in addition to capturing
option risk?
a) Gap report
b) Sources and uses funds report
c) Earnings-at-risk simulation model
d) Economic value of equity simulation model
Verified Answer -D. EVE Model. While earnings-at-risk simulations
typically span 12- and 24-month horizons. EVE models are able to capture
a broader spectrum of maturities. Also, management can account for
options risk with assumptions. See Interest Rate Risk Handbook, Appendix
E
True or False:
First National Bank's BSA program provides for a system of internal
controls, independent testing, and designates an individual as BSA officer.
Based on this information alone, we can ascertain that the program is
effective and meets regulatory requirements.
Verified Answer -False. The four pillars of a BSA program include internal
controls, independent testing, BSA officer, and employee training. In
addition, the program/policy should be written, approved by the Board
annually, and notated in the minutes. See 12 CFR 21.21
North Bank, N.A. has historically had well-developed funds management
practices and access to funding sources on favorable terms. The last
, Canary report indicated more than sufficient on-hand liquidity. Based on
these facts, what is the most likely component rating?
A) 1
B) 2
C) 3
D) 4
Verified Answer -A- "1" A rating of "1" indicates strong liquidity levels
and well-developed funds management practices. The institution has
reliable access to sufficient sources of funds on favorable terms to meet
present and anticipated liquidity needs. See Bank Supervision Process
Handbook, page 52.
On the UBPR, which of the following criteria is used to define all
commercial bank peer groups?
a) asset size
b) number of banking offices
c) asset mix
d) location
Verified Answer -a-asset size. The UBPR breaks banks into 15 peer groups
and a De Novo group. All banks are grouped by assets, which are then
further stratified between number of banking offices and locations for
smaller asset sizes. For peer group purposes, banks with assets of more
than $300 million are not segregated by the number of offices or location.
While the de novo is grouped by years, they are subject to a $750MM
asset limitation. See UBPR User's Guide Page II-2
True or False:
