Capital Markets School - Case Study

Exhibit A

WARNING TRIGGER

MONITORING ITEMS

Heightened Funding Needs • Rapid growth or acquisition • Increasing trend in exercise of off-balance sheet commitments • Inability to sell assets • Negative publicity or internal issues that could lead to negative press coverage, market rumors • Increased early redemption of time deposits, above-average roll-over failure • Increased ATM or electronic transfer withdrawals, significant declines in overall deposits • Increasing concentration of high-cost and volatile funding Capital at Risk • Deteriorating trend in loan performance, nonperforming, and past due loans • Negative trend in earnings performance • Deteriorating financial condition • Decline in regulatory capital levels • Decline in regulatory capital levels or threat of losing well-capitalized status Decrease in Funds Availability • Decline in institution’s composite CAMELS rating • Increased collateral requirements to secure public deposits • Increased collateral/margin requirements, widening spreads • Reluctance of broker-dealer to cooperate External Influence • Concentration of credits extended to industries or geographical areas with present or anticipated financial problems • Negative trend in economic conditions, industry conditions, or local market conditions • Capital market disruption, uncertainty in industry • Disturbances in payment and settlement systems due to external events

Internal: Budget variance, unfunded commitments draw schedule, local and regional press releases or news articles, customer complaints or concerns, deposit renewals/run-off reports, vault cash management reports, unusual branch activity, funding concentration reports,

Internal: Budget/cash flow projection variance, problem loan trend reports, financial performance reports, capital adequacy reports,

Internal: Contingent funding availability reports, collateral management reports, risk assessments, reports of examination, liquidity cash flow reports

External: market reports, economic indicators, industry trends in nonperforming loans, credit spreads, credit events, market rates/volatility, geopolitical events, natural catastrophes

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