Bank Directors Seminar, Coeur d'Alene, ID, September 15-17, 2019

WHOLESALE FUNDING ALTERNATIVES

• FHLB Borrowings • Brokered deposits • Internet based (rate board) CD's • Repurchase Agreements • CDARS Deposits • Institutional Borrowings • Federal Reserve borrowings • Commercial Paper

TO ENSURE EFFECTIVE USE OF WHOLESALE FUNDING...

1.Have a plan — a strategy with clear goals and a policy with risk limits

2.Borrowings should be on a "no surprise" basis — document your strategy and dovetail with your cash flow-based liquidity analysis and your contingency funding plan 3. If appropriate, model the anticipated transaction — assess risk vs reward — micro and macro — on earnings and capital at risk • Is the transaction material to the size of my balance sheet? • Does the leverage on a stand alone basis create sizeable risk? What are my "bets" on rates? Is there a duration/cash flow mismatch? • How does the transaction(s) impact my overall risk profile? Credit risk, liquidity risk, interest rate risk? Do I remain in compliance with my policies? • Does it comply with my policy risk limits? Have I clearly communicated the strategies and risks to the ALCO and the Board and obtained required approvals? • What spread or net income will be generated over the near term (12 - 24 months)? How does it change if rates go up or down? What is my breakeven?

4. Diversify types/sources, timing of the borrowings, maturities, and structures

5.Monitor the results with clear metrics

6. Have an exit strategy

7. Consider advances and brokered CD's with a put option

8. Rule of thumb — the non-call/convert period for a callable or convertible advance should be at least 25% (preferably 40%) of the final maturity

-29-