State Bank’s balance sheet is listed below. Market yields are in parenthesis, and amounts are in millions.

Assets			Liabilities and Equity
Cash	$20		Demand deposits	$ 250
Fed funds (1.05%)	150		Savings accounts (1.5%)	20
3-month T-bills (5.25%)	150		MMDAs (2.5%)
2-year T-notes (6.50%)	100		(no minimum balance requirement)	340
8-year T-bonds (7.50%)	200		3-month CDs (4.2%)	120
5-year munis (floating rate)			6-month CDs (4.3%)	220
(8.20%, repriced @ 6 months)	50		1-year CDs (4.5%)	375
6-month consumer loans (6%)	250		2-year CDs (5%)	425
1-year consumer loans (5.8%)	300		4-year CDs (5.5%)	330
5-year car loans (7%)	350		5-year CDs (6%)	350
7-month C&I loans (5.8%)	200		Fed funds (1%)	225
2-year C&I loans (floating rate)			Overnight repos (1.25%)	290
(5.15%, repriced @ 6-months)	275		6-month commercial paper (3%)	300
15-year variable rate mortgages			Subordinate notes:
(5.8%, repriced @ 6-months)	200		3-year fixed rate (6.55%)	200
15-year variable rate mortgages			Subordinated debt:
(6.1%, repriced @ year)	400		7-year fixed rate (7.25%)	100
15-year fixed-rate mortgages (7.85%)	300		Total liabilities	$ 3,545
30-year variable rate mortgages
(6.3%, repriced @ quarter)	225
30-year variable rate mortgages
(6.4%, repriced @ month)	355
30-year fixed-rate mortgages (8.2%)	400
Premises and equipment	20		Equity	400
Total assets	$3,945		Total liabilities and equity	$ 3,945

Required:

a. What is the repricing gap if the planning period is 30 days? 6 months? 1 year? 2 years? 5 years?

b. What is the impact over the next six months on net interest income if interest rates on RSAs increase 60 basis points and on RSLs increase 40 basis points?

c. What is the impact over the next year on net interest income if interest rates on RSAs increase 60 basis points and on RSLs increase 40 basis points?

Answer rating: 100% (QA)

Duration gap is a difference between the duration of assets and duration of liabilities held by fina... View the full answer