Bank must have financially efficient performance in the market. Poor financial condition of John Marshall can cause the bank to face issues related to the operational in-efficiency. Lack of resources not only causes the bank to show poor performance in the market but also causes to destroy the image of the bank in the market. In this paper various resources as financial statements, website content and books are used to collect information about the operations and resources of the John Marshall Bank and risk factors.

Credit Risk

        Credit risk increase when financial condition of the bank indicate that bank will not be able in the near future to fulfill its financial claims and promises (for instance bank will not be able to payback its credits). Financial analysis of the John Marshall bank indicate that total assets of the bank in 2015 were 928620 while the liabilities of the bank were recorded as 819,318. In accordance to this bank is not facing high credit risk as Bank can payback liabilities through assets. In short it can be said that John Marshall bank have enough resource to pay its short term and long term obligations. It means that currently the bank liquidity position is stable and terms of liquidity bank performance is good.

 Foreign Exchange Risk

        John Marshall bank also face Foreign Exchange risk when they deal with the foreign loans denominations and FX transactions. Changes in the currency rate turns the fortune. Decrease in the currency value of foreign asset generate effect on the domestic investment and operations of the bank. For instance increase in the rate of Dollar will cause the bank to pay more pounds (if bank is dealing with pounds) for their liability. John Marshall bank face Foreign exchange rate because most of the transactions are dominated in foreign currency. Currently banks needs to focus on such strategies through which it can improve its performance in terms of foreign exchange rate risk mitigation

Liquidity Risk

         Liquidity risk is really important to be manage. Basically term liquidity refers to the financial ability of the bank or a company to meet its current liabilities through the use of its current assets. Similarity liquidity risk describes that a bank will fail to meet its financial demands (short-term or current, less than the time duration of one year). For instance bank will be unable to payback its short-term loan due in the next month etc (Banks and Dunn 2004).

           Liquidity risk most of the time occur in the banks because of the inability of the banks to convert their hard or tangible assets as property, or security in cash within the required time without any type of loss of capital or income in the converting process. In accordance to the analysis John Marshall bank also faced the liquidity risk issue but management of the bank ever tried their best to limit the impact on the overall operations and manage the risk in advance.

            There are several causes that encourage the John Marshall bank to have liquidity risk as the market in which they operates and depends sometimes subject to the liquidity risk. Liquidity risk for the John Marshall bank can be calculated through the use of financing gap formula that is mentioned below:

Table 1Financing Gap of John marshal bank

            Financing gap represents the way through which we can subtract the average deposits from the average loans. In accordance to this we can say that in 2015, liquidity risk is less than the liquidity risk of 2014 which is indicating that John Marshall bank has managed the liquidity risk efficiently and its performance in managing liquidity risk is good.

Insolvency Risk

        Johan Marshall Bank faced insolvency risk as Interest rate, market, credit and other risk factor cause insolvency risk because of which bank becomes unable to offset sudden decrease in the value of the assets as because of lack of available capital. The insolvency risk  have significant impact on its performance.

Interest Risk 

    Interest risk is risk factor associated with the interest rate. Interest risk occurs when there comes a situation of mismatch in maturities of liabilities and assets of the Financial Institutes (as Bank) particularly when the interest rates are highly volatile. Bank sometimes purchases primary securities through issuing the secondary securities that is a high risky action but compensates if generate yield in end. There are two of this risk.

Refinancing Risk

When the assets of the bank are longer-term as compared to the liabilities (loans, notes payable, and other liabilities).

Reinvestment Risk 

When the assets of the bank are shorter-term as compared to the liabilities of the bank. 

Basically prices of the securities gets change when the rate of interest get changes as people prefer to buy the securities that can provide the high interest rate relative to the other available options (Banks and Dunn 2004). When interest rate on securities goes down value of securities also goes towards decline. John Marshall bank manage such risk factors through adopting strategies and policies in advance to regulate their current and long term operations in effective manner with minimum chances of risk and loss. Therefore it can be said that bank is doing good in managing the reinvestment risk.

Table 2Impact of Interest rate on Mortgages

               Above mentioned graph describe how the interest rate changes affect the market of mortgage in the bank. Increase in interest rate was increasing the number of mortgagees, while opposite to this decrease in interest rate decreasing trend of mortgages also (SAUNDERS 2011).    

Market Risk

        The risk factor that incurred in the trading assets (as securities and bonds) and liabilities in response to the changes occurred in the interest rate, asset prices, governmental policies, and exchange rate changes (Banks and Dunn 2004). In accordance to the analysis of the bank market risk for the investment portfolios are relatively less and long term while trading assets, liabilities highly liquid. Therefore risk factor affect both in different manner.     

Off-balance Sheet Risk

      Off-balance sheet risk in the John Marshall Bank refers to the risk associated with the liabilities and assets that are not directly mentioned in the balance sheet but in future causes to make changes in the balance sheet of the company. John Marshall Bank usually do not write their off-balance sheet assets and liabilities in the end of balance sheet while they make records separately, however most of their off-balance activities are derivatives positions, letter of credit and loans commitments (Banks and Dunn 2004).  

References of Bank Performance and Risks of John Marshall Bank

Banks, Erik, and Richard Dunn. 2004. Practical Risk Management: An Executive Guide to Avoiding Surprises and Losses. John Wiley & Sons. Accessed 12 12, 2018.

SAUNDERS. 2011. Financial Institutions management. Tata McGraw-Hill Education. Accessed 12 12, 2018.