fixed-rate mortgages prepay each year. You also estimate that 10% of checkable deposits and 20% of savings accounts are rate sensitive. Second National Bank Assets Liabilities Reserves $ 1,500,000 Checkable Deposits $ 15,000,000 Securities Money Market Deposits $ 5,500,000 1 Year $ 6,000,000 Savings Accounts $ 8,000,000 1 to 2 Years $ 8,000,000 CDs 2 years $ 12,000,000 Variables-rate $ 15,000,000 Residential Mortgages 1 Year $ 22,000,000 Variables-rate $ 7,000,000 1 to 2 Years $ 5,000,000 Fixed-rate $ 13,000,000 2 years $ 2,500,000 Commercial Loans Fed Funds $ 5,000,000 1 Year $ 1,500,000 Borrowings 1 to 2 Years $ 18,500,000 1 Year $ 12,000,000 2 years $ 30,000,000 1 to 2 Years $ 3,000,000 Buildings, etc. $ 2,500,000 2 years $ 2,000,000 Bank Capital $ 5,000,000 Total $100,000,000 Total $100,000,000 (a) What is the current Income GAP for Second National Bank? (b) What will happen to the bank’s current net interest income if rates fall by 75 basis points
The following financial statement is for the current year. From the past, you know that 10% of fixed-rate mortgages prepay each year. You also estimate that 10% of checkable deposits and 20% of savings accounts are rate sensitive. Second National Bank Assets Liabilities Reserves $ 1,500,000 Checkable Deposits $ 15,000,000 Securities
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