Bank Analysis School Case Study

IRRSA 4.1.2

Core Analysis: Deposit Sensitivity Su nn y S tate Bank

12/31/ X5 9/30/ X5 6/30/ X5

3/31/ X5 12/31/ X4

9/30/ X4 6/30/ X4

3/31/ X4 12/31/ X 3 9/30/ X 3

6/30/ X 3

3/31/ X 3

# Measure 1 Market Proxy: Federal Funds 2 Market Proxy Quarterly Change (bp) 3 Market Proxy Percent Change 4 NOW Accounts: 5 NOW Cost of Funds (COF) 6 NOW - Market ProxySpread (bp) 7 NOW Average Volume 8 Savings including MMDAs (SMMDA): 9SMMDA COF 10SMMDA - Market ProxySpread (bp) 11SMMDA Average Volume 12 CDs< $250M: 13 CDs < $250M COF 14 CDs < $250M - Market ProxySpread (bp) 15 CDs < $250M Average Volume 16 CDs > $250M: 17 CDs> $250M COF 18 CDs> $250M - Market ProxySpread (bp) 19 CDs> $250M Average Volume

1.79% 35 24%

1.44% 24 20%

1.20% 14 13%

2.22% 30 16%

1.92% 13 7%

1.06% 11 12%

0.37% 12 48%

0.69% 24 53%

0.45% 15 50%

0.30% -7 -19%

0.25% 6 32%

0.95% 26 38%

0.57% -165 25,179

0.64% -128 25,169

0.60% -119 24,832

0.47% -97 23,204

0.33% -62 23,071

0.26% -4 21,603

0.41% -65 23,469

0.28% -41 21,763

0.26% -19 21,642

0.28% -9 21,285

0.25% 0 19,037

0.41% -79 23,378

0.21% -201 23,364

0.22% -170 23,737

0.22% -122 24,119

0.22% -3 23,187

0.20% -159 23,975

0.24% -82 25,193

0.24% -71 24,941

0.24% -45 25,037

0.24% -21 24,629

0.26% -11 23,442

0.23% -7 23,098

0.23% -97 25,542

N/A N/A N/A

N/A N/A N/A

N/A N/A N/A

N/A N/A N/A

0.80% -112 11,056

0.86% -58 10,753

0.60% -60 12,628

0.74% -32 13,478

0.68% -1 14,135

0.92% -130 9,600

0.81% -98 11,368

0.71% -24 13,549

N/A N/A N/A

N/A N/A N/A

N/A N/A N/A

N/A N/A N/A

1.21% 15 1,652

1.21% 26 1,647

1.23% -99 1,622

0.77% -67 2,599

1.24% 55 1,609

1.26% -66 1,586

1.33% -46 1,503

1.57% 37 1,531

Reliable? Beta is the percent change in COF relative to a change in the Federal Funds rate. For example, if the Beta was 35%, you would expect the COF to change 35bp for every lOObp change in the Federal funds rate.

#

Beta

Rate Sensitivity to Federal Funds:

1 NOW Sensitivity:

R 2 is the "Goodness of Fit" test that shows the percentage of change (0% - 100%) in the COF that is explained by the change in the Federal funds. For example, an R 2 of 90% would mean that 90% of the change in the COF is explained by the change in the Federal funds. Accounts with high R 2 are highly interest rate sensitive. Generally, an R 2 of less than 60% implies that there is an unreliable relationship between the COF and the Federal funds. It is important to remember that the R 2 and Beta only show the historical relationship between the COF and the Federal funds . They are only one piece of information to use in assessing the reasonableness of NMD rate assumptions.

25%

2 Rising Rate Environment (Dec-03 -Sep-06)

87%

95%

3 Falling Rate Environment (Jun-07 - Dec-11)

31%

4 5 Savings and MMDA Sensitivity:

11%

74%

6 Rising Rate Environment (Dec-03 -Sep-06)

20%

7 Falling Rate Environment (Jun-07 - Dec-11)

90%

Washington, DC's Capital Markets Branch identified the Rising and Falling Rate Environment periods.

An "error" value for Beta and R 2 indicates that there was insufficient data to calculate the metric.

5/10