Question

Use the following information to answer questions 3 through 6.

Farmers State Bank of Mumford is currently assessing interest rate risk. The information compiled includes the following items:                                                          

Fixed-rate loans maturing in 6 months            5,000,000

Fixed-rate loans maturing in 12 months            12,000,000

All other fixed-rate loans                    75,000,000

Fixed rate securities maturing in 6 months            15,000,000

Fixed rate securities maturing in 12 months           12,000,000

All other fixed-rate securities                5,000,000

Variable rate loans maturing in 6 months            12,500,000

Variable rate loans maturing in 12 months            32,500,000

All other variable-rate loans                    45,000,000

Federal funds sold                        66,000,000

NOW accounts                        35,000,000

Money Market Deposit Accounts (MMDA)            15,000,000

Federal funds purchased                    10,000,000

Passbook savings accounts                       750,000

3 month certificates of deposit (CDs)            46,000,000

6 month certificates of deposit (CDs)            69,000,000

1 year certificates of deposit (CDs)                27,600,000

5 year certificates of deposit (CDs)               41,400,000

All variable rate loans at Farmers State Bank are repriced at the beginning of each month. Federal funds sold and purchased are repriced daily. Interest rates on passbook savings accounts can change once a year. Interest rates on NOW and MMDA accounts change daily.

1. Categorize each of the items from Farmers State Bank into assets and liabilities. Circle the assets.   

2. Next, categorize assets into:

RSA 0 to 6 month repricing,       $____________

RSA 7 to 12 month repricing       $____________

All other assets.            $____________

Categorize liabilities into:

RSL 0 to 6 month repricing        $___________

RSL 7 to 12 month repricing       $___________

All other liabilities.            $___________

3. Determine the 6 month and 12 month dollar gap at Farmers State Bank.

4. Determine the 6 month and 12 month gap ratio at Farmers State Bank.

Answer 1

Asnswer :

Liabilities	Amount ($)	Assets	Amount ($)
Fixed rate securities maturing in 6 months	1,50,00,000	Fixed rate loan maturing in 6 months	50,00,000
Fixed rate securities maturing in 12 months	1,20,00,000	Fixed rate loans maturing in 12 months	1,20,00,000
All other fixed rate securities	50,00,000	All other fixed rate loans	7,50,00,000
Federal funds purchased	1,00,00,000	Variable rate loans maturing in 6 months	1,25,00,000
Now accounts	3,50,00,000	Variable rate loans maturing in 12 months	3,25,00,000
Money market deposit accounts	1,50,00,000	All other variable rate loans	4,50,00,000
Passbook savings accounts	7,50,000	Federal funds sold	6,60,00,000
3 months certificate of deposits	4,60,00,000	-	-
6 months certificate of deposits	6,90,00,000	-	-
1 Year certificate to deposits	2,76,00,000	-	-
5 Year certificate to deposits	4,14,00,000	-	-

Use the pricing (Funding) model to determine the funding gap for the maturity bucket of the 180 day

RSA : 0 to 6 month repricising	-
Fixed rate loans maturing in 6 months	50,00,000
Variable rate loans maturing in 6 months	1,25,00,000
	1,75,00,000
RSA : 7 to 12 Month repricising	-
Fixed rate loans maturing in 12 months	1,20,00,000
Variable rate loans maturing in 12 months	3,25,00,000
	4,45,00,000
All other Assets	-
All other fixed rate loans	7,50,00,000
All other varialbe rate loans	4,50,00,000
RSL : 0 to 6 month repricising	-
Fixed rate securities maturing in 6 months	1,50,00,000
Money market deposit accounts	1,50,00,000
3 months certificate of deposits	4,60,00,000
6 months certificate o deposits	6,90,00,000
	14,50,00,000
RSL : 7 to 12 month repricising	-
Fixed rate securities maturing in 12 months	1,20,00,000
1 year certificate ot deposits	2,76,00,000
-	3,96,00,000
All other liabilities	-
All other fixed rate securities	50,00,000
5 year certificate of deposits	4,14,00,000

RSA : 0 to 6 month repricisng	1,75,00,000
RSL : 0 to 6 months repricisng	14,50,00,000
Dollar gap	-12,75,00,000
Gap Ratio (RSA /RSL)	12.1%

RSA : 7 to 12 month repricisng	4,45,00,000
RSL : 7 to 12 months repricisng	3.96,00,000
Dollar gap	49,00,000
Gap Ratio (RSA / RSL)	112.4%

RSA : 0 to 12 month repricisng	6,20,00,000
RSL : 0 to 12 months repricisng	18,46,00,000
Dollar gap	-12,26,00,000
Gap Ratio (RSA / RSL)	33.6%

Federal funds sold and federal funds urchased are not considered in the above buckets as they are not rate sensitive and are repriced trasacted on dailly basis . Also, now accounts and passbook saving accounts are not considered in the above uckers are they are in a way considered in nature equal to demand deposits and under the repricising model for assessing the pricising gap, the same are not considered.