FINANCE 564

Problem 2 Two depository institutions have composite CAMELS ratings of 1 or 2 and are “well capitalized.” Thus, each institution falls into the FDIC Risk Category I deposit insurance assessment scheme. Institution A has average total assets of $750 million and average Tier I equity of $75 million. Institution B has average total assets of $1 billion and average Tier I equity of $110 million. Institution A has no unsecured debt or brokered deposits. Institution B has no unsecured debt and an asset growth rate over the last four years of 8 percent. Further, the institutions have the following financial ratios and CAMELS ratings:

	Institution A	Institution B
Tier I leverage ratio (%)	9.80	8.45
Net income before taxes/risk-weighted assets (%)	2.00	1.65
Nonperforming loans and leases/gross assets (%)	0.35	0.90
Other real estate–owned/gross assets (%)	0.42	0.90
Brokered deposits/total assets (%)	2.20	0.75
One year asset growth	4.35	6.80
Loans as a Percentage of Total Assets:
Construction and Development	0.00	0.00
Commercial and Industrial	10.56	18.68
Leases	0.65	2.15
Other Consumer	17.55	18.95
Loans to Foreign Government	0.00	0.60
Real Estate Loans Residual	0.00	0.00
Multifamily Residential	0.00	1.10
Nonfarm Nonresidential	0.00	0.00
1–4 Family Residential	41.10	33.54
Loans to Depository Banks	0.00	0.50
Agricultural Real Estate	1.10	0.35
Agricultural	0.40	0.40
page 442 CAMELS Components:
C	1	2
A	1	1
M	1	1
E	2	1
L	1	3
S	2	3

The DIF reserve ratio is currently 1.30 percent. Calculate the deposit insurance assessment and the dollar value of the deposit insurance premium for each institution

 

 

Problem 11

What is the contribution to the asset base of the following items under the Basel III requirements? ( LG 13-7 )

a. $10 million cash reserves.

b. $50 million 91-day U.S. Treasury bills.

c. $25 million cash items in the process of collection.

d. $5 million UK government bonds, OECD CRD rated 1.

e. $5 million French short-term government bonds, OECD CRD rated 2.

f. $1 million general obligation bonds.

g. $40 million repurchase agreements (against U.S. Treasuries).

h. $2 million loan to foreign bank, OECD rated 3.

i. $500 million 1–4 family home mortgages, category 1, loan-to-value ratio 80 percent.

j. $10 million 1–4 family home mortgages, category 2, loan-to-value ratio 95 percent.

k. $5 million 1–4 family home mortgages, 100 days past due.

l. $500 million commercial and industrial loans, AAA rated.

m. $500 million commercial and industrial loans, B- rated.

n. $100,000 performance-related standby letters of credit to a AAA rated corporation.

o. $100,000 performance-related standby letters of credit to a municipality issuing general obligation bonds.

p. $7 million commercial letter of credit to a foreign bank, OECD CRC rated 2.

q. $3 million five-year loan commitment to a foreign government, OECD CRC rated 1.

r. $8 million bankers’ acceptance conveyed to a U.S. AA rated corporation.

s. $17 million three-year loan commitment to a private agent.

t. $17 million three-month loan commitment to a private agent.

u. $30 million standby letter of credit to back an A rated corporate issue of commercial paper.

v. $4 million five-year interest rate swap with no current exposure.

w. $6 million two-year currency swap with $500,000 current exposure.