BAS Presentations - March 2023

4 HIGH RISK CHARACTERISTICS Heavy reliance on wholesale or other potentially unstable funding: • Regulatory and other external forces may limit or terminate the use of these sources based on the bank’s condition or other market conditions. • May include brokered deposits, listing service deposits, FHLB borrowings, Federal Funds purchased, repurchase agreements, public funds, and large depositors. Asset quality problems: • Pose a threat to the overall condition of the institution and can result in the reduction or termination of funding lines. • High volume of classified items, past due, non-accrual, charge-offs, and/or other real estate owned. Below or near well capitalized thresholds: • Federal regulations place restrictions on the use of brokered deposits and rates paid on deposit products. 2 Limited on-balance sheet liquidity: • Low volume of assets readily convertible to cash at a reasonable cost. • Cash, interest bearing balances, Federal Funds sold, unpledged securities (marketable, investment quality, and without punitive depreciation) . BEST REFERENCE MATERIALS:  FIL-13-2010: Funding and Liquidity Risk Management  Summer 2017 Supervisory Insights  September 2014 FedLinks (Supervisory Expectations for Contingency Funding Plans) OTHER RESOURCES:  FIL-84-2008: Liquidity RiskManagement  FIL 25-2009: Interest Rate Restrictions on Institutions that are Less than Well Capitalized  FIL-62-2009: Determining Conformance with Interest Rate Restrictions for Less than Well Capitalized Institutions  FIL-69-2009: Process for Determining if an Institution Subject to Interest Rate Restrictions is Operating in a High-Rate Area 

EVALUATION APPROACH

Quantitative: • Analyze past balance sheet changes and determine how growth was funded. • Calculate the amount of liquid assets and/or ensure management’s calculation is reasonable. • Determine the amount of off-balance sheet funding available (e.g. lines of credit, FHLB borrowing availability). • Assess the degree of reliance on wholesale and other potentially unstable funding sources. Cite a concentration if necessary. • Evaluate the level, trend, and relationship of key ratios to peer in the UBPR. • Ensure capital ratios exceed well capitalized standards. 1 Qualitative: • Review the findings of prior examinations. • Review pro-forma cash flow reports, budgets, loan pipeline reports, and other maturity reports that project future cash in-flows and out-flows. • Determine the adequacy of the Contingency Funding Plan and liquidity stress tests. • Ensure assumptions in cash flow projections and stress tests are reasonable. • Review any other internal reports, policies, and procedures. • Assess corporate governance (e.g. committee and Board reporting). • Assess the diversification and reliability of external funding sources considering the bank’s overall condition and market conditions. LIQUIDITY COMPONENT RATING CRITERIA  The adequacy of liquidity sources compared to present and future needs and the ability to meet liquidity needs without adversely affecting operations or overall condition.  The availability of assets readily convertible to cash without undue loss.  Access to money markets and other sources of funding.  The level of diversification of funding sources, both on- and off-balance sheet.  The degree of reliance on short-term, volatile sources of funds, including borrowings and brokered deposits, to fund longer termassets.  The trend and stability of deposits.  The ability to securitize and sell certain pools of assets.  The capability of management to properly identify, measure, monitor, and control the institution’s liquidity position, including the effectiveness of funds management strategies, liquidity policies, management information systems, and contingency fundingplans. 1. FDIC Rules and Regulations Part 325 Subpart B – CAPITAL MAINTENANCE: Prompt Corrective Action Standards 2. FDIC Rules and Regulations Part 337.6 – UNSAFE AND UNSOUND BANKING PRACTICES: Brokered Deposits