Capital Markets School - Case Study

Contingency Funding Plan OVERVIEW AND DEFINITION Liquidity stress or crisis situations can result from both internal and external sources, and such situations can be short, medium, or long-term in nature. Changes in economic conditions or exposure to market, credit, liquidity, operational, legal, and settlement risks can affect the Bank’s liquidity risk profile. The following scenarios have been identified as potential situations that can cause liquidity stress or crisis: • Asset quality deteriorates • Operating losses are realized • Capital ratios fall below regulatory standards Additionally, the Bank shall remain aware of other possible risks that potentially could affect the liquidity risk profile of the Bank. Additional warning triggers and monitoring items are included in Exhibit A. The Bank also acknowledges that such risks affect both on and off-balance sheet sources of liquidity. On-balance sheet sources include liquid funds, unpledged securities, and loans available for sale, essentially assets easily converted to cash within a relative short period of time. Examples of off balance sheet sources are Federal funds purchased lines, FHLB advances, Federal Reserve borrowings, and brokered deposits. Short-term liquidity stress or crisis situations, defined over weekly or monthly horizons, would not significantly limit access to traditional funding sources. In response to a short-term event, the Bank would pursue the most cost-effective sources of funds identified and prioritized in the Funding Strategies and Priorities section of this document. However, medium and long-term liquidity stress or crisis situations, defined as time horizons up to one year and beyond one-year respectively, would limit access to normal sources of funds. For example, access to brokered deposits, repurchase programs, and lines of credit would possibly be limited. Utilizing Federal Home Loan Bank advances and the Federal Reserve Discount Window borrowings would be prudent in such situations. Additionally, liquidation of investment portfolio holdings or loan portfolio participations would be considered in such situations. • Access to funding sources is limited and/or expensive • Negative news coverage increases reputation risk • Deposit withdrawals increase

Page 3 Smith Shellnut Wilson, LLC  Investment Counsel and Management  SEC Registered Investment Advisor 661 Sunnybrook Rd., Suite 130  Ridgeland, MS 39157  Telephone 601-605-1776  Fax 601-605-1710