Question

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. Further, the institutions have the following financial ratios and CAMELS ratings: Use Table. Institution 1 Institution 2 Tier I leverage ratio (%) 8.63 7.76 Loans past due 30–89 days/gross assets (%) 0.46 0.57 Nonperforming assets/gross assets (%) 0.36 0.51 Net loan charge-offs/gross assets (%) 0.29 0.33 Net income before taxes/risk-weighted assets (%) 2.16 1.87 Adjusted brokered deposits ratio (%) 0.00 15.57 CAMELS components: C 1 1 A 1 3 M 1 1 E 3 3 L 1 2 S 1 1 Pricing Multiplier Uniform Amount 4.861 Tier I leverage ratio (%) (0.056) Loans past due 30-89 days/gross assets (%) 0.575 Nonperforming assets/gross assets (%) 1.074 Net loan charge-offs/gross assets (%) 1.210 Net income before taxes/risk-weighted assets (%) (0.764) Adjusted brokered deposits ratio (%) 0.065 Weighted average CAMELS component ratings 1.095 Calculate the initial deposit insurance assessment rate for each institution. (Do not round intermediate calculations. Round your answers to 2 decimal places. (e.g., 32.161)) Institution 1 Institution 2 Initial assessment rate

Answer 1

For determinig insurance assessment, we assume the following percentage for CAMELS Weighted Average Camels Components Particulars Institution 1 Institution 2 1*.25.25 2*.25 .50 2.20-.40 2*.20 .40 1.25 .25 3.25-.75 3 .10.30 3.10-.30 3 .10.30 1*.10-.10 2*.10-.20 2*.10-.20 Weighted avg CAMELS Component 1.7 2.25

Institution 1 Institution 2 Particulars Uniform amount Tier 1 Leverage ratio Loan past due 30-89 days/gross assets NPA/Gross Assets Net Loan charge offs/gross assets Net income before tax/Risk weighted assets Adiusted brokered deposit ratio Weighted avg CAMELS Component ratin Pricing multiplier Risk Measure Value Assessment Rate Risk Measure Value Assessment Rate 4.861 0.438 0.368 0.623 0.484 1.482 1.017 2.464 4.861 0.056 0.575 1.074 1.21 0.764 0.065 1.095 8.7 0.53 0.43 0.36 2.23 0 1.7 4.861 0.487 0.305 0.462 0.436 1.704 0.000 1.862 7.83 0.64 0.58 0.4 1.94 15.64 2.25 Total 5.734 7.896 Initial deposit Insurance Assessment Rate