Maverick Bank & Trust Asset/Liability Risk Management

Linda Clement

ALX Consulting

Maverick Bank & Trust

• A/L Risk Management Ratios

• Balance Sheet Mix • Capital and Growth • Liquidity • Funding • Interest Rate Risk – Earnings • Market Risk in Securities • Long-Term Assets • Economic Value of Equity (EVE)

Maverick Bank & Trust

• Balance Sheet Mix • Loans grew by $23.3 mm • Core deposits (net) increased $ .2 mm • Non-core + Other Liabilities +Equity $19.8 mm • Liquidity (Plug) decreased $( 3.4)mm

Maverick Bank & Trust

• Capital & Growth (Capacity/Risk Appetite) • Tier 1 Leverage decreased as avg assets > earnings • Tier 1 RBC was stable as loans/earnings > same rate • Total RBC decreased as loans > earnings • Equity increased as earnings increased

Maverick Bank & Trust

• Liquidity Mix (Quantity and Quality) • Short-Term Liquidity

– Fed Funds $ 0.0 mm

• Securities – AFS $ 48.3 mm – HTM $ 0.0 mm – Pledged $ 19.7 mm

• Total Liquidity as a % of assets 22.7% • Adj Liquidity (less pledged) as % of assets 13.5%

Maverick Bank & Trust

• Non-Core Funding (Dependency) • NCF less ST Liquidity/LTA>1yr • What balance sheet changes increased NCFD?

Maverick Bank & Trust

• Interest Rate Risk – Earnings-at-Risk • What’s the Bank’s IRR position? • What’s driving that position? • How much is too much?

Maverick Bank & Trust

• Interest Rate Risk – Earnings-at-Risk • Why did IRR increase this quarter?

Maverick Bank & Trust

• Components of IRR (Year 1) Rate Sensitive Cash Flows/Sensitivity/Timing

Maverick Bank & Trust

• Core Deposit Repricing – Betas

Maverick Bank & Trust

• Market Risk in Securities

Maverick Bank & Trust

• Market Risk in Securities

Maverick Bank & Trust • Interest Rate Risk – Economic Value of Equity

Maverick Bank & Trust

• Net Interest Margin

Maverick Bank & Trust Summary

• Bank has reasonable risk taking capacity.

– Balance sheet liquidity equals 22.7% of assets.

• However, there are no overnight investments.

• Relying on non-core deposits.

– Capital is above regulatory minimums.

• Interest rate risk is slightly liability sensitive. – NIM and earnings would decline if rates rise and vice versa.

• Economic Value of Equity would decline if rates rise and vice versa. – Change in value of securities represents about 40% of the risk in fixed-rate assets.