Bank Analysis School Case Study

Sunny State Bank

LIQUIDITY - FUNDING

Funding Amounts Over Time (Broad)

10M 20M 30M 40M 50M 60M 70M 80M

Metrics

Wholesale Core Dep & TCDs>250M

20X0 Q4

20X1 Q1

20X1 Q2

20X1 Q3

20X1 Q4

20X2 Q1

20X2 Q2

20X2 Q3

20X2 Q4

20X3 Q1

20X3 Q2

20X3 Q3

20X3 Q4

20X4 Q1

20X4 Q2

20X4 Q3

20X4 Q4

20X5 Q1

20X5 Q2

20X5 Q3

20X5 Q4

Possible Funding Concentrations (% Total Assets)

12%

10%

8%

Metrics

Brokered Deposits FHLB Listing Service Public Funds Other Borrowings

6%

4%

2%

20X0 Q4

20X1 Q1

20X1 Q2

20X1 Q3

20X1 Q4

20X2 Q1

20X2 Q2

20X2 Q3

20X2 Q4

20X3 Q1

20X3 Q2

20X3 Q3

20X3 Q4

20X4 Q1

20X4 Q2

20X4 Q3

20X4 Q4

20X5 Q1

20X5 Q2

20X5 Q3

20X5 Q4

Funding is a critical aspect of liquidity. Local core deposits are preferable as these are generally more stable and lower cost than wholesale funding. It is easier for banks operating in areas with more local deposits than loan demand to maintain a solid amount of liquid assets. Banks which struggle to obtain local deposits often rely on wholesale sources to fund growth. 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 chart. The primary risk of a funding concentration is that the funds might have to be replaced quickly or at unfavorable terms if the condition of the bank deteriorates.