Bank Analysis School - Case Study & Resources

LIQUIDITY - FUNDING

Sunny State Bank

Funding Amounts Over Time (Broad)

80M

70M

60M

50M

Metrics

40M

Wholesale

30M

Core Dep & TCDs>250M

20M

10M

20 X9 Q4

20 X0 Q4

20 X1 Q4

20 X2 Q4

20 X3 Q4

20 X4 Q4

20 X5 Q4

Possible Funding Concentrations (% Total Assets)

12.0%

10.0%

Metrics

8.0%

Brokered Deposits

FHLB

6.0%

Listing Service

Public Funds

4.0%

Reciprocal Deposits

2.0%

Other Borrowings

20 X9 Q4

20 X0 Q4

20 X1 Q4

20 X2 Q4

20 X3 Q4

20 X4 Q4

20 X5 Q4

• Funding is a critical aspect of liquidity. Local core deposits are generally more stable and lower cost than wholesale funding. Banks operating in areas with more local deposits than loan demandfind it easier to maintain a solid amount of liquid assets. • Funding concentrations will typically be cited when a single funding source exceeds 10 percent of total assets, which is represented by the dotted horizontal line in the applicable chart. The primary risk of a funding concentration is that the funds might have to be replaced quickly or at unfavorable terms if a bank's condition deteriorates.