Bank Analysis School Case Study

Sunny State Bank

LIQUIDITY - WHOLESALE FUNDING

Wholesale Funding to Total Assets

14.0%

12.5%

12.0%

10.0%

8.9%

8.7%

7.7%

Metrics

7.4%

8.0%

6.4%

6.2%

7.7%

Bank State All Banks

5.7% 5.5% 5.5%

5.4%

5.2%

6.0%

5.0%

4.8%

4.9%

4.8%

4.8%

4.7%

4.0%

4.2%

3.7%

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

Net Noncore Funding Dependency Ratio

10.0% 12.0% 14.0% 16.0% 18.0%

16.9%

11.5%

10.8%

11.5%

9.5%

9.4%

9.1%

9.0%

Metrics

8.1%

8.2%

7.7%

2.0% 4.0% 6.0% 8.0%

6.8%

Bank State All Banks

6.5%

7.0%

6.5%

6.0%

5.9%

5.8%

5.7%

5.3%

5.0%

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

• Wholesale funding includes brokered deposits, listing service deposits, FHLB borrowings, other borrowings, and Federal Funds purchased. Note that this is different from what is included as noncore funding on the UBPR. • Reliance on wholesale funding contributes to liquidity risk because these funding sources may not be available in times of financial stress. However, the strategic use of a moderate amount of wholesale funding should not be criticized at banks in good financial condition with adequate risk management practices. Examiners should be quicker to criticize the use of wholesale funding if there is a lower level of capital, asset quality problems, or weak risk management. • Net Noncore Funding Dependency Ratio matches the UBPR. The UBPR definition of noncore funding includes: TCDs > insurance limit, brokered deposits, FHLB borrowings, other borrowings, and federal funds purchased.