2023 Community Bank Case Study Competition Journal

2023 COMMUNITY BANK CASE STUDY COMPETITION

Figure 6: Core and Non-Interest Bearing Deposits

very conservatively at this time, and sensibly so, with the ramifications of the pandemic still unknown. Getting into 2021 and 2022, LINKBANK’s loan-to deposit ratio was higher than the peer average, at 93% vs. 73%, and 98% vs. 86% respectively. LINK executives found it prudent to have such a high loan to-deposit ratio, since their deposit base was solid and the loans they make are to parties that they have relationships with. A loan-to-deposit ratio this high is also an indicator that the bank was using their non-interest bearing deposit funding efficiently, and taking advantage of this deposit base and using it for higher profitability.

$0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000

2018

2019

2020

2021

2022

Core Deposits

NIB Deposits

Figure 7: Loan-to-Deposit Ratios

120%

98%

100%

93%

86%

86%

73%

80%

63%

60%

40%

20%

0%

LINKBANK Peer Average LINKBANK Peer Average LINKBANK Peer Average 2020 2021 2022

a peer group of other Pennsylvania Community Banks. This serves as a measure of liquidity because the higher the LTD ratio, the less likely the bank is to be able to meet any immediate fund requirements. A typical LTD ratio sits at around 80-90%. If this ratio is over 100%, it may be troubling as the bank has loaned out more per dollar than it has in deposits. We found it most relevant to present data since 2020, since the interest rate environment has changed substantially in that period. In 2020, the bank’s ratio was 63%, significantly lower than the peer average of 86%. LINKBANK was operating

Bank President Brent Smith did stress the importance of continuing to increase non interest bearing deposits in this environment to continue their high-growth goals. Section Summary After thorough financial analysis through the UBPR, we find that it is extremely important for LINKBANK to continue to monitor their liquidity and loan-to-deposit ratio, in light of economic and financial institution specific uncertainty. LINKBANK has significantly

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