Central Michigan University Liquidity and Funding Ratios Worksheet

Section1 

Consider Southern bank’s Uniform Bank Performance Report (UBPR) and provide an overview of your bank’s liquidity by reviewing the following areas:

1. Liquidity and Funding Ratios especially the Net Non-Core Funding Dependence and Loan to Assets Ratios –  What are the trends in these ratios? How do they compare to the peer?

2. The availability of liquid assets readily convertible to cash without undue loss-Consider Federal funds sold, available for sale securities, loans for sale, etc.

3. Core deposit/asset growth – Are core deposits capable of funding anticipated asset growth?

4. Diversification of funding sources – A bank with strong liquidity has a strong core deposit base, established borrowings lines, and procedures in place for acquiring internet-based or other forms of emergency borrowing.

5. External Forces – Economic conditions, competition, marketing efforts, etc. have a material impact on the need for liquidity going forward.

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Section2 

Four ratios to focus on when assessing asset quality include:

1. Asset Growth Rate – This ratio details the change in total assets over the past 12 months.

2. Non-current Loans and Leases to Gross Loans and Leases – This ratio reflects the percentage of loans that are 90 days or more past due, or are no longer accruing interest

3. Net Losses to Average Total Loans and Leases – This ratio presents the level of net losses, on an annualized basis, as a percentage of the total portfolio. It takes into consideration any recoveries on prior period losses.

4. Loan and Lease Allowance to Total Loans – This ratio measures the allowance
available to absorb loan losses relative to total loans outstanding. 

In relation to these ratios, answer the following questions:
– Asset Growth Rate – What is the rate of asset growth and how would you characterize
this growth?  
– What category dominated asset growth?  
– Non-current Loans to Gross Loans – How would you characterize the level of
delinquencies?  
– Net Losses to Average Total Loans –  What has the trend been?  
– Loan and Lease Allowance to Total Loans and Leases –  What conclusions can you draw
about the adequacy of the allowance?