1 / 8

INTEREST RATE SWAP

INTEREST RATE SWAP. 11.5% Fixed-Rate Obligation in Eurobond Market. S&L pays interest on $15 million at 11.5%. Southwest Savings Association. Commercial Bank Counterparty. Bank Pays Interest on $15 Million at LIBOR + .25%. Variable-Rate Obligation on Deposits. INTEREST RATE SWAP.

Thomas
Download Presentation

INTEREST RATE SWAP

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. INTEREST RATE SWAP 11.5% Fixed-Rate Obligation in Eurobond Market S&L pays interest on $15 million at 11.5% Southwest Savings Association Commercial BankCounterparty Bank Pays Interest on $15 Millionat LIBOR + .25% Variable-RateObligation on Deposits

  2. INTEREST RATE SWAP SOUTHWEST SAVINGS ASSOCIATION BALANCE SHEET ASSETS Adjustable rate loans (10.5%) $25.5Fixed rate loans (13.50%) $65.8Non-earning assets $ 4.5 $95.8 LIABILITIES & NET WORTH Adjustable rate funds (9.8%) $62.5Fixed-rate funds (11.85%) $28.8Net Worth $ 4.5 $95.8 GAP = $25.5 - $62.5 = -$37.0

  3. INTEREST RATE SWAP SOUTHWEST SAVINGS ASSOCIATION INCOME STATEMENT PROJECTED PRE-TAX EARNINGS REVENUES: Rate Sensitive Assets $2.678 Fixed-Rate Assets $8.883$11.561 INTEREST EXPENSE: Rate-Sensitive Liabilities ($6.125) Fixed-Rate Liabilities ($3.413)($9.538) PRE-TAX EARNINGS $2.023

  4. INTEREST RATE SWAP Projected Pre-Tax Earnings with SWAPand no Interest Rate Change REVENUES: Rate Sensitive Assets $2.678 Fixed-Rate Assets 8.883 Swap Interest Income ($15 at 10.60%) 1.590$13.151INTEREST EXPENSE: Rate-Sensitive Liabilities ($6.125) Fixed-Rate Liabilities (3.413) Swap Payments ($15 at 11.50%) (1.725) ($11.26)PRE-TAX EARNINGS $1.888

  5. INTEREST RATE SWAP Projected Pre-Tax Earnings withInterest Rate Increase REVENUES: Rate Sensitive Assets (at 12.30%) $3.137 Fixed-Rate Assets (at 13.50%) 8.883$12.020INTEREST EXPENSE: Rate-Sensitive Liabilities (at 11.10%) ($6.938) Fixed-Rate Liabilities (at 11.85%) (3.413)($10.351)PRE-TAX EARNINGS $1.669 Without Swap

  6. INTEREST RATE SWAP Projected Pre-Tax Earnings withInterest Rate Increase REVENUES: Rate Sensitive Assets (at 12.30%) $3.137 Fixed-Rate Assets (at 13.50%) 8.883 Swap Interest Income ($15 at 12.20%) 1.830$13.850INTEREST EXPENSE: Rate-Sensitive Liabilities (at 11.10% ($6.938) Fixed-Rate Liabilities (at 11.85%) (3.413) Swap Payments ($15 at 11.50%) (1.725) ($12.076)PRE-TAX EARNINGS $1.774 With Swap

  7. INTEREST RATE SWAP Projected Pre-Tax Earnings withInterest Rate Decrease REVENUES: Rate Sensitive Assets (at 9.50%) $2.423 Fixed-Rate Assets (at 13.50%) 8.883$11.306INTEREST EXPENSE: Rate-Sensitive Liabilities (at 8.90%) ($5.563) Fixed-Rate Liabilities (at 11.85%) (3.413)($8.976)PRE-TAX EARNINGS $2.330 Without Swap

  8. INTEREST RATE SWAP Projected Pre-Tax Earnings withInterest Rate Decrease REVENUES: Rate Sensitive Assets (at 9.50%) $2.423 Fixed-Rate Assets (at 13.50%) 8.883 Swap Interest Income ($15 at 9.55%) 1.433$12.739INTEREST EXPENSE: Rate-Sensitive Liabilities (at 8.90%) ($5.563) Fixed-Rate Liabilities (at 11.85%) (3.413) Swap Payments ($15 at 11.50%) (1.725) ($10.701)PRE-TAX EARNINGS $2.038 With Swap

More Related