BAS Case Study - March 2023

Liquidity Funding Procedures Great Lakes Bankers’ Bank

Sunny State Bank maintains an active Fed Funds agreement with Great Lakes Bankers’ Bank (GLBB). Balances in excess of a predetermined level are automatically sold into the overnight fed funds market. Balances below the predetermined level are automatically purchased from the overnight fed funds market.

Fed Funds Daily Procedures

• The Administrative Assistant prints the Cash Position report from GLBB’s Pathway system, using the designated computer in the bookkeeping area. The report should be printed after 10:30 a.m. to allow a majority of the day’s items to memo post to the GLBB system. • The Cash Position report, indicating a sold or borrowed position, is given to the Chief Executive Officer (CEO) for review and instructions. • The primary backup for the Administrative Assistant is the Bookkeeper. The Loan Administrator and Chief Financial Officer (CFO) also have the capability of printing the Cash Position Report. The backup for decision-maker for the CEO is the CFO. Fed Funds SOLD Procedures • When the Bank is in a sold position, no action is required. However, action may be considered as follows. • The CEO will monitor the level of Fed Funds and take the appropriate action to maximize the income to the Bank. • The CEO may maintain the level of Fed Funds Sold in situations where there is a known need for the cash in the short term. These needs include, but are not limited to, the following: the level of Fed Funds Sold, anticipated loan disbursements, projected cash letter volumes (depending on the day of the week and/or time of the month), anticipated customer withdrawals, and payments on other borrowings. • Based on an analysis of the Bank’s current situation and the level of Fed Funds Sold, the CEO may determine that the Fed Funds Sold should be invested in the bond market. See the Investment Policy. • If the Fed Funds Purchased balance is less than the borrowing limit set by GLBB, no action is required. • If the Fed Funds Purchased balance is greater than the predetermined GLBB limit, additional overnight funds will be borrowed from the FHLB in order to bring the GLBB Fed Funds Purchased balance within the borrowing limit. (See separate instructions below). • If the Bank will be in a purchased position over a 3-day weekend, the Administrative Assistant will obtain the Fed Funds and Overnight Borrowing rates from both GLBB and FHLB, so that the CEO can authorize borrowing at the lower rate over the holiday weekend. FHLB Overnight Borrowing Procedures The Bank maintains a Cash Management Advance (CMA) account (#75656) with the FHLB. This line of credit is renewed annually and is generally 5% of total assets as of the reporting date. • When the CEO approves borrowing from the CMA, the Administrative Assistant calls the FHLB at (800) 828-4191 and informs them of the borrowing amount and the Bank’s account number. Fed Funds PURCHASED Procedures

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