Question: Exeter national banks report the following figure in its current report of condition:
| Assets (millions) |
|
Liabilities (millions) |
|
| Cash and interbank deposes |
$50 |
Core deposits |
$50 |
| Short-term security investments |
15 |
Large negotiable CDs |
150 |
| Total loans. gross |
375 |
Deposits placed by brokers |
65 |
| Long-term securities |
150 |
Other deposits |
140 |
| Other assets |
10
|
Money market liabilities |
95 |
| Total assets |
$600
|
Other liabilities |
70 |
|
|
Equity capital |
30 |
|
|
Total liabilities and equity capital |
$600
|
a. Evaluate the funding mix of deposits and non deposit sources of funds employed by Exeter. Given the mix of its assets, do you see any potential problems? What changes would you like to see management of this bank make? Why?
b. Suppose market interest rates are projected to rise significantly. Does Exeter appear to face significant losses due to liquidity risk? Due to interest rate risk? Please be as specific as possible.