Turn 2: Accelerating Growth

In the second turn, the bank continues to grow by adding another $1,000 in loans, bringing total assets to $4,000.  The loan portfolio becomes more balanced, and overall asset quality improves to 725.  Net income continues to improve, rising to negative $17.  However, this growth comes with trade-offs.  Capital declines further, and liquidity drops significantly as assets expand without additional funding changes.

Rate sensitivity also increases, as the structure of the balance sheet becomes more exposed to changes in interest rates.

The bank has expanded its lending business, and the impacts of that growth are now becoming more visible across the balance sheet.