Keystone National Bank

SWOT analysis of the Keystone National Bank.

Strengths

The Keystone National Bank has a solid position on the local market with 16 offices in the area and $410 million in total resources. It had delivered steady Net Income over the last 2 years, averaging $3.5 million per year. The bank loaned over 68% of its total assets in net loans and leases. That is 8% higher than its peers. The major categories of loans that the bank does are commercial and consumer loans. The Keystone National Bank pays competitive deposit rates at the high end to attract customers, establish reputation and enlarge its base of core deposits.

Weaknesses

In October of 1990 the bank was issued a report of national examiners, which was very critical of the bank’s policies and procedures for monitoring and controlling its risk position. Specifically, the examiners pointed out 3 areas of concern. First, it was the bank’s exposure to credit, interest-rate, and liquidity risks. The bank’s earnings performance and its capital strength were excessively judged. The banks past due & nonaccrual loans and leases reached almost 2% at the end of 1990 compare to 1.5% of its peers. Temporary investment to assets ratio was below average by 5%, indicating that the bank had fewer interest-bearing deposits with other banks, Federal funds sold, and short-term investment securities that its peers, that may lead to a possible liquidity problem in the future.

Another very strong indicator of the possible liquidity risk was the ratio of Net loans & leases to core deposits, which was at 107.62% compare to the industry average of 78.59%. In other word, the Keystone National bank didn’t have enough funds to make those loans and had to borrow more from the market or Feds. In addition, a one year GAP between rate-sensitive assets and rate-sensitive liabilities was (8.45%) compare to the industry’s average of (5.88%), exposing the bank to an interest-rate risk.

The bank heavily depended on its large CDs in amount of...