1. Ag Bank Sim the Bank Management Game

2. Ag Bank Sim Setting Rural Oklahoma county 3 banks in the county
Name your bank
2-4 bank management team members per bank
1 bank manager
Dynamic environment
Competition between county banks
Changing economic conditions
Uncertain future

3. Objectives Provide a learning experience in making bank decisions
Increase understanding of the interactions among decisions
Generate discussion regarding impact of decisions

4. Local Economy Ag is a principal industry, particularly Cow-calf
Stocker cattle
Wheat

5. Goal of Each Bank Profit maximization Maintain market share
Serve the community
Increase the capital base

6. Currently
All banks have identical financial statements as of Dec. 31, 2010 (2010.5)
Banks are within regulatory compliance
Each period of play covers 6 months so your decisions for apply to January – June

7. Decisions Each Period Interest rates on 5 types of loans
Ag production
Ag real estate
Real estate
Commercial
Consumer
Interest on 4 types of deposits
Demand deposits (non-interest bearing)
NOW
MMDA
Savings
CDs

8. Decisions Each Period Number of loan officers & salaries
Salaries of employees
Advertising expenses
Service fee
Volume of new loans and investments
Investments to sell, if any
Government: 6 month, 1 year, 3 year
Municipal bonds: 2 year, 5 year

9. Table 1. Financial Condition
Assets
Cash & due from is calculated by the program
Securities that the bank has purchased
Excess cash is automatically invested in Federal Funds (up to 100% of equity capital).
Loans that the bank has made in previous periods
Bank premises & equipment is a constant

10. Table 1, continued Liabilities & Stockholders’ Equity Deposits
Federal Funds Purchase
If needed to meet reserve requirements last period.
If amount needed exceeds total investment securities, the charge is 1.5 time the fed funds rate.
Capital and Surplus
Retained Earnings
Capital to asset ratio must stay above 5%.

11. 2010.5

12. Table 2. Income Statement
Paid semi-annually from all loans and securities
Service charge income is on DDA, NOW, & MMDA
Expenses
Deposit expense is interest paid to depositors
Fed Funds expense is cost of borrowing fed funds
Advertising
Salaries: officer and employees
Other: postage, supplies, utilities, …
Loan losses – random within a range
Taxes

13. 2010.5

14. Table 3. Management Decisions
Shows last period (2010.5)
Interest rates: both loans and deposits
Salaries, advertising, service charge
New loans made (maximums and actuals)
New investments made (always what you specify)
Maturing assets in near-term
All that you own, by year of acquisition
column matured as of Dec. 31, 2010.

15. 2010.5

16. Table 4. Economic and Statistical Information
Average rates at local banks (you and 2 competitors)
Next period it will show meaningful information
Market share, by category, for local banks
Allows you to see how you are competing by category
Actual rates for next six months
Fed Funds; 3 Government securities; 2 Munis

17. Table 4, continued Actual for the local economy
Income
Retail sales
Land values
Housing cost index
Farm price index
Futures price of wheat
Outlook for the local economy (next page)
Income
Retail sales
Land values
Housing cost index
Farm price index
Futures price of wheat

18. 2010.5

19. Table 5. Outstanding Loans & Securities
Column heading indicates loan or investment type
Detailed by period in which each was acquired
Interest rate for each amount is also shown
All rates are fixed rates.

20. 2010.5
2002.0
2002.5
2003.0
2003.5
2004.0
2004.5
2005.0
2005.5
2006.0
2006.5
2007.0
2007.5
2008.0
2008.5
2009.0
2009.5
2010.0
2010.5
2009.0
2009.5
2010.0
2010.5

21. Table 6. Estimation of Funds
Shows the $ amount you need to put to productive use!!!
Let’s complete Period 1

23. Estimation of Funds Available for New Loans and Investments

24. 2010.5

25. Estimation of Funds Available for New Loans and Investments

26. 2010.5

27. Estimation of Funds Available for New Loans and Investments

28. 2010.5

29. Estimation of Funds Available for New Loans and Investments

30. 2010.5

31. Estimation of Funds Available for New Loans and Investments

32. 2010.5

33. Estimation of Funds Available for New Loans and Investments

34. 2010.5

35. Estimation of Funds Available for New Loans and Investments

36. 2010.5

37. Estimation of Funds Available for New Loans and Investments

38. Management Decision
1 Year with 1 Annual Payment
10 Year with 10 Annual Payments
2 Year with 2 Annual Payments
2 Year with 4 Semi-Annual Pmts

39. 2010.5

40. Management Decision Maximum of .5% change / period
1 Year with 1 Annual Payment
10 Year with 10 Annual Payments
2 Year with 2 Annual Payments
2 Year with 4 Semi-Annual Pmts
Maximum of .5% change / period

41. Decisions
Remember these are maximums or caps, you are not guaranteed to make this level of loan.
1st Half of year 6-8 Mil.

42. 2010.5

43. Decisions
Remember these are maximums or caps, you are not guaranteed to make this level of loan.
1st Half of year 6-8 Mil.
You will buy this amount of each investment.
Tax Equivalent Yield = Tax Free Rate
(1 – Tax Rate)
6.52%
7.05%

44. 2010.5

45. Decisions
0.25% min.

46. 2010.5

47. 2010.5

48. Generally Speaking
Common sense, along with supply & demand are good things to keep in mind.
Also, things like diminishing marginal product
Ag Bank Sim is based upon real bank data, so take into consideration the way a real community and community bank will operate.

49. Timeline for Ag Bank Sim
Date
Tasks
Students create an account on and sign up to play
Orientation to game
Teams make first decisions
Review Period 2 results
Make decisions for Period 3
Review Period 3 results
Make decisions for Period 4
Game results and awards
Summary and conclusions