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WearegoingtouseacustomMicroso1Excelworkbookconsis8ngof3spreadsheetstofigureeverythingout.Itisbasedonapublishedspreadsheetforasimplecommercialbankfrom“MoneyBasicsbyChristopherD.Moore,2003”(seeappendixinsourcedocument:“HowToStartaPublicBank.pdf”),butwiththeaddi8onoffundsfromexis8ngcity/country/state/regionassets,modifiedforapublicbank,andmodeledout8years.

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Poli8calen88esover100,000peoplelikelyhaveenoughavailableassetstostartaPublicBank,butyouhavetolearntoexaminetheComprehensiveAnnualFinancialReportstobesure.Thesereportsaretypicallyhundredsofpageslong,butweareonlyinterestedinafewfigures.SeeCAFRMAN.COM.

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Startup&FixedCosts(Tab)APublicBankhasasimplersetupthanacommercialbank.Thereisonlyonebranch–headquarters–andthereisnoneedformostofthestafftomeetthepublic,sincethesole,ornearlysole,depositoristheen8tythatownsthebank,inthiscase,thecityofOakland.

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TheStartupandFixedCostsspreadsheetissplitinthispresenta8onbutwouldappearasasinglesheetintheworkbook.Thefootnotesrefertothefirstsec8oninthepreviousslide.

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Note:Opera8ngRa8osarethoseusedbyChristopherMoorein2003.Thesemayhavechangedsincethenorbedifferentinyourarea.Interestrateshavecomedownsignificantlyfromwhenthisspreadsheetwascreated.Itisuptoyoutofindoutthecurrentminimumstomeet,aswellasotherregulatoryrequirements.

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HereweintroduceDepositsforthefirst8me,takenfromtheGeneralFundRevenues(GFR).$178misdepositedtostart,butthiswillclimbto2/3oftheGFR,or$400m,byyear2.Interestrates,costrateshavebeenadjustedtomeetcurrentcondi8ons(2016).

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Thebankstartspayingdividendsbacktothepensionfundinyear3,a1er2startupyearswhenthereislibleprofit.Thisisonly40%ofnetearningstostart,butwillincreaseyearlyasprofitsclimb.NotethepaymentofdividendsseeminglydepressesPerformance;thesewouldbemuchhigherifdividendswerekeptbythebank.Opera8ngra8osarecompliantandthereisamoderaterateofloanlossesduetodefault(basedonfiguresfromtheBankofNorthDakota,thena8on’sonlyPublicBank).

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Dividendpayoutsincreasesignificantlyintheearlyyears,thentaperoffbyyear8.Ifweprojectedbeyondyear8,dividendscouldcon8nuetoslowlyincrease,decreasingthe8meto“makeup”the$50minini8alequity.Underthisconserva8vescenario,$50mispaidbacktothepensionfundbyyear16.

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Byyear8,thebankissolidlyprofitable.Therewasnoneedforprivateinvestment,borrowingthroughbonds,orforanyothermoney-raisingac8vity.IftherewasnodividendpaymentthefiguresforROEwouldbe19.20%andforROA1.32%whichcomparesfavorablytoboththeoriginalMooresamplespreadsheetandtothebalancesheetforthehighlysuccessfulBankofNorthDakota.

Ques8ons?

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