Question: 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
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 |
| 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 |
What is the current Income GAP for Second National Bank? What will happen to the banks current net interest income if rates fall by 75 basis points?
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