Capital Markets School - Case Study

Executive Summary Liquidity risk is the risk that an institution’s financial condition or overall safety and soundness is adversely affected by an inability (or perceived inability) to meet its obligations. Institutions can be confronted with various situations that can give rise to increased liquidity risk. Based on regulatory guidelines, it is appropriate to produce a contingency funding plan. The following plan will comprehensively address the liquidity issue covering the following bases: overview and definition, policy guidelines and trended ratios, funding sources, funding strategies and priorities, cash flow projections, stress tests, and the identification of a contingency funding team. The Bank’s current liquidity status is summarized below: Access and limits to funding sources, as well as interest rates offered, are affected by regulatory views of capital adequacy. Capital ratios indicate the Bank is well capitalized per regulatory standards, and there are no policy exceptions. Access to funding sources is available without restriction. • The FHLB uses an internal risk analysis of a bank’s financial condition and performance and assigns an internal credit rating accordingly. This risk-focused approach evaluates a bank’s critical capital cushion, return on equity, and provision expense percentage. The Bank’s rating as of September 30, 2021 is estimated to be a B, which allows the Bank to use its availability under the blanket lien status. • Liquidity risk is considered “Normal” as of September 30, 2021. • Should a shortfall materialize, secondary and tertiary liquidity sources are adequate to cover same. The September 30, 2021 Liquidity Contingency created with Liquidity 360© indicates that the Bank can manage modeled liquidity stress. The time horizon for this analysis is through September 30, 2023.

Respectfully submitted,

Brandy E. Smith Risk Management Specialist Smith Shellnut Wilson

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