Risk Management Strategy amp Solutions

copy 2020 Darling Consulting Group Inc bull 260 Merrimac Street bull Newburyport MA 01950 bull Tel 9784630400 bull DarlingConsultingcom

A Proactive Approach to Liquidity Management

Joseph C Kennerson Managing Directorjkennersondarlingconsultingcom

January 31 2020

Mark A Haberland Managing Directormhaberlanddarlingconsultingcom

copy 2020 Darling Consulting Group Inc Page 2

Todayrsquos Focus

Establishing a Total Liquidity Solution

Redefining Liquid Assets

Developing a Dynamic Forecast amp Stress Test Framework

Revitalizing Your Risk Monitor

copy 2020 Darling Consulting Group Inc Page 3

Industry Trends

copy 2020 Darling Consulting Group Inc Page 4

Regulatory Radar2020 NCUA Priorities

ldquoOn average credit union balance sheets continue to exhibit lower levels of on-balance-sheet liquidityhellipfor credit unions with low levels of on-balance sheet liquidity examiners

will assess liquidity management by evaluating

-The potential effects of changing interest rates on market value and borrowing capacityhellip-Scenario analysis for liquidity risk modelinghellip-The appropriateness of contingency fundinghelliprdquo

- 20-CU-01 NCUA 2020 Supervisory Priorities

copy 2020 Darling Consulting Group Inc Page 5

Regulatory Radar

Liquid asset pressure

Cash minimums

Risk monitoring

Documentation and assumptions support

Board communication and education

Dynamic forecasting

Stress testing

Common Areas of Feedback

copy 2020 Darling Consulting Group Inc Page 6

ESTABLISHING A TOTAL LIQUIDITY SOLUTION

copy 2020 Darling Consulting Group Inc Page 7

ldquoTraditionalrdquo Measures

The Ability to Raise Cash Quickly at a Reasonable Cost

and Without Principal Loss

Wholesale Funding Reliance

Cash + Short-term

Investments

LoanShares

Theory vs PracticeDoes the Definition Fit

copy 2020 Darling Consulting Group Inc Page 8

Total Liquidity Solution

Balance Sheet Liquidity

bull Cash and Securities

Just in Time Inventory

bull FHLB Borrowings

Strategic Reserve

bull Non-Member Deposits

Catastrophe Insurance

bull FRB Borrowings

Liquidity Stress Testing amp Contingency Funding Plan

bullRisk TriggersMonitoringbullStress ScenariosbullRelief StrategiesbullContingency Funding Plan

90-Day Forecasting

bullNet Loan Growth ExpectedbullNet Deposit Growth ExpectedbullProjected Cash Flow from Investment and Wholesale Funding Portfolios

Establish Appropriate Policies

copy 2020 Darling Consulting Group Inc Page 9

Liquidity Management Impact

Loan Strategy

Deposit Pricing

Strategy

Investment Strategy

Growth Strategy Earnings

A Credit Unionrsquos Perspective on Liquidity Will Impact

copy 2020 Darling Consulting Group Inc Page 10

REDEFINING LIQUID ASSETS

copy 2020 Darling Consulting Group Inc Page 11

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

I LIQUID ASSETS

30000500000

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

0 0 0

10000 20000 0

0 0 0

0 0 00 0 0

0 0 00 0 0

0

10000 19000 0

29000

0

Pct Of Assets15000

74000 148

Redefining Liquid AssetsBasic Surplus Liquid Assets

Cash + ST InvestmentsAssetsShortfalls

Forces to hold more cash Could increase IRR exposure to

falling rates Focuses more on cash flow vs

collateral (needing to wait for cash to come due)

Ultimately can hurt NII

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 12

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

I LIQUID ASSETS

10000500000

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

0 0 0

10000 45000 0

0 0 0

0 0 00 0 0

0 0 00 0 0

0

10000 42750 0

52750

0

Pct Of Assets10000

72750 146

Redefining Liquid Assets

Collateral-Based Approach Focuses on ability to access cash

quickly Optimizes liquidity yield

What is a comfortable level for our CU

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 13

NII Impact on Cash Extension

Add 100bps of spread Protect against falling rates Maintain relative sensitivity to rising rates Neutral liquid asset shift

copy 2020 Darling Consulting Group Inc Page 14

If ldquostrongerrdquo liquid assets then consider

Keep cash to work Identify ability to shift liquidity into

loans Consider more of a defensive deposit

strategy Maximize alternative funding sources Develop a strong contingency funding

plan

If ldquotighterrdquo liquid assets then consider

Define liquid asset cushion May have to be more offensive in

deposit pricing strategies Maximize alternative funding sources Defend with ldquototalrdquo liquidity (next slide)

Strategy Considerations

copy 2020 Darling Consulting Group Inc Page 15

FOCUSING ON TOTAL LIQUIDITY

copy 2020 Darling Consulting Group Inc Page 16

Total Liquidity FocusBasic Surplus Total Liquidity

Reserve based on funding concentrations

Available borrowing capacity vs wholesale reliance

Non-Member CD capacity

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB

Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)Current Brokered Deposit Balances

REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS

BASIC SURPLUS W FHLB amp BROKERED DEPOSITS

10 30000

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 250030 2500

III QUALIFYING FHLB LOAN COLLATERAL

175000125000

35000

37750 76

112750 226

IV BROKERED DEPOSIT ACCESS

12500050000

75000

500000

50000

162750 326

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 17

Strategy Shift CashInvestments into Loans

Shifting cash into loans will reduce liquid assets but can increase spread by +2-3 with a minimal impact to total liquidity

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB 103500 207

14450050000

94500

III QUALIFYING FHLB LOAN COLLATERAL

175000144500

35000

9000 18

30 250010 30000

88

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 2500

0

Pct Of Assets15000

44000

0

10000 19000 0

29000

0 0 00 0 00 0 0

0 0 00 0 0

0 0 0

10000 20000 0

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

I LIQUID ASSETS

0500000

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 18

NII Impact on Holding Mortgages

Year Base Δ NII

1 $1459

2 $1773

Total $3232

50 Increase in NII over 3 Years

March 2019 March 2016

Page 19copy 2019 Darling Consulting Group Inc

Policy Discussion

Discuss if certain policies are needed such as Cash + ST InvestmentsAssets LoansShares

Discuss Policy Guidelines Liquid Assets Total Liquidity

Discuss Wholesale Funding comfort levels FHLB Non-Member Deposits Total Wholesale

Page 20copy 2019 Darling Consulting Group Inc

DCG Contingency Funding PlanhellipWhatrsquos IncludedCFP Table of Contents

copy 2020 Darling Consulting Group Inc Page 21

DEVELOPING A DYNAMIC FORECASTamp STRESS TEST FRAMEWORK

copy 2020 Darling Consulting Group Inc Page 22

Dynamic Liquidity Forecast

Source Liquidity360degreg

$140MM Loan Growth$70MM Deposit Growth$70MM Borrowings

copy 2020 Darling Consulting Group Inc Page 23

Total Liquidity vs Call Report Ratios

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													0																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													44000								88
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			9000							18
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												144500
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												144500
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													94500
																																			BASIC SURPLUS W FHLB			103500							207
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			153500							307

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													30000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													74000								148
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			39000							78
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			114000							228
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			164000							328

copy 2020 Darling Consulting Group Inc Page 2

Todayrsquos Focus

Establishing a Total Liquidity Solution

Redefining Liquid Assets

Developing a Dynamic Forecast amp Stress Test Framework

Revitalizing Your Risk Monitor

copy 2020 Darling Consulting Group Inc Page 3

Industry Trends

copy 2020 Darling Consulting Group Inc Page 4

Regulatory Radar2020 NCUA Priorities

ldquoOn average credit union balance sheets continue to exhibit lower levels of on-balance-sheet liquidityhellipfor credit unions with low levels of on-balance sheet liquidity examiners

will assess liquidity management by evaluating

-The potential effects of changing interest rates on market value and borrowing capacityhellip-Scenario analysis for liquidity risk modelinghellip-The appropriateness of contingency fundinghelliprdquo

- 20-CU-01 NCUA 2020 Supervisory Priorities

copy 2020 Darling Consulting Group Inc Page 5

Regulatory Radar

Liquid asset pressure

Cash minimums

Risk monitoring

Documentation and assumptions support

Board communication and education

Dynamic forecasting

Stress testing

Common Areas of Feedback

copy 2020 Darling Consulting Group Inc Page 6

ESTABLISHING A TOTAL LIQUIDITY SOLUTION

copy 2020 Darling Consulting Group Inc Page 7

ldquoTraditionalrdquo Measures

The Ability to Raise Cash Quickly at a Reasonable Cost

and Without Principal Loss

Wholesale Funding Reliance

Cash + Short-term

Investments

LoanShares

Theory vs PracticeDoes the Definition Fit

copy 2020 Darling Consulting Group Inc Page 8

Total Liquidity Solution

Balance Sheet Liquidity

bull Cash and Securities

Just in Time Inventory

bull FHLB Borrowings

Strategic Reserve

bull Non-Member Deposits

Catastrophe Insurance

bull FRB Borrowings

Liquidity Stress Testing amp Contingency Funding Plan

bullRisk TriggersMonitoringbullStress ScenariosbullRelief StrategiesbullContingency Funding Plan

90-Day Forecasting

bullNet Loan Growth ExpectedbullNet Deposit Growth ExpectedbullProjected Cash Flow from Investment and Wholesale Funding Portfolios

Establish Appropriate Policies

copy 2020 Darling Consulting Group Inc Page 9

Liquidity Management Impact

Loan Strategy

Deposit Pricing

Strategy

Investment Strategy

Growth Strategy Earnings

A Credit Unionrsquos Perspective on Liquidity Will Impact

copy 2020 Darling Consulting Group Inc Page 10

REDEFINING LIQUID ASSETS

copy 2020 Darling Consulting Group Inc Page 11

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

I LIQUID ASSETS

30000500000

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

0 0 0

10000 20000 0

0 0 0

0 0 00 0 0

0 0 00 0 0

0

10000 19000 0

29000

0

Pct Of Assets15000

74000 148

Redefining Liquid AssetsBasic Surplus Liquid Assets

Cash + ST InvestmentsAssetsShortfalls

Forces to hold more cash Could increase IRR exposure to

falling rates Focuses more on cash flow vs

collateral (needing to wait for cash to come due)

Ultimately can hurt NII

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 12

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

I LIQUID ASSETS

10000500000

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

0 0 0

10000 45000 0

0 0 0

0 0 00 0 0

0 0 00 0 0

0

10000 42750 0

52750

0

Pct Of Assets10000

72750 146

Redefining Liquid Assets

Collateral-Based Approach Focuses on ability to access cash

quickly Optimizes liquidity yield

What is a comfortable level for our CU

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 13

NII Impact on Cash Extension

Add 100bps of spread Protect against falling rates Maintain relative sensitivity to rising rates Neutral liquid asset shift

copy 2020 Darling Consulting Group Inc Page 14

If ldquostrongerrdquo liquid assets then consider

Keep cash to work Identify ability to shift liquidity into

loans Consider more of a defensive deposit

strategy Maximize alternative funding sources Develop a strong contingency funding

plan

If ldquotighterrdquo liquid assets then consider

Define liquid asset cushion May have to be more offensive in

deposit pricing strategies Maximize alternative funding sources Defend with ldquototalrdquo liquidity (next slide)

Strategy Considerations

copy 2020 Darling Consulting Group Inc Page 15

FOCUSING ON TOTAL LIQUIDITY

copy 2020 Darling Consulting Group Inc Page 16

Total Liquidity FocusBasic Surplus Total Liquidity

Reserve based on funding concentrations

Available borrowing capacity vs wholesale reliance

Non-Member CD capacity

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB

Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)Current Brokered Deposit Balances

REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS

BASIC SURPLUS W FHLB amp BROKERED DEPOSITS

10 30000

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 250030 2500

III QUALIFYING FHLB LOAN COLLATERAL

175000125000

35000

37750 76

112750 226

IV BROKERED DEPOSIT ACCESS

12500050000

75000

500000

50000

162750 326

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 17

Strategy Shift CashInvestments into Loans

Shifting cash into loans will reduce liquid assets but can increase spread by +2-3 with a minimal impact to total liquidity

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB 103500 207

14450050000

94500

III QUALIFYING FHLB LOAN COLLATERAL

175000144500

35000

9000 18

30 250010 30000

88

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 2500

0

Pct Of Assets15000

44000

0

10000 19000 0

29000

0 0 00 0 00 0 0

0 0 00 0 0

0 0 0

10000 20000 0

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

I LIQUID ASSETS

0500000

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 18

NII Impact on Holding Mortgages

Year Base Δ NII

1 $1459

2 $1773

Total $3232

50 Increase in NII over 3 Years

March 2019 March 2016

Page 19copy 2019 Darling Consulting Group Inc

Policy Discussion

Discuss if certain policies are needed such as Cash + ST InvestmentsAssets LoansShares

Discuss Policy Guidelines Liquid Assets Total Liquidity

Discuss Wholesale Funding comfort levels FHLB Non-Member Deposits Total Wholesale

Page 20copy 2019 Darling Consulting Group Inc

DCG Contingency Funding PlanhellipWhatrsquos IncludedCFP Table of Contents

copy 2020 Darling Consulting Group Inc Page 21

DEVELOPING A DYNAMIC FORECASTamp STRESS TEST FRAMEWORK

copy 2020 Darling Consulting Group Inc Page 22

Dynamic Liquidity Forecast

Source Liquidity360degreg

$140MM Loan Growth$70MM Deposit Growth$70MM Borrowings

copy 2020 Darling Consulting Group Inc Page 23

Total Liquidity vs Call Report Ratios

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													0																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													44000								88
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			9000							18
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												144500
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												144500
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													94500
																																			BASIC SURPLUS W FHLB			103500							207
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			153500							307

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													30000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													74000								148
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			39000							78
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			114000							228
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			164000							328

copy 2020 Darling Consulting Group Inc Page 3

Industry Trends

copy 2020 Darling Consulting Group Inc Page 4

Regulatory Radar2020 NCUA Priorities

ldquoOn average credit union balance sheets continue to exhibit lower levels of on-balance-sheet liquidityhellipfor credit unions with low levels of on-balance sheet liquidity examiners

will assess liquidity management by evaluating

-The potential effects of changing interest rates on market value and borrowing capacityhellip-Scenario analysis for liquidity risk modelinghellip-The appropriateness of contingency fundinghelliprdquo

- 20-CU-01 NCUA 2020 Supervisory Priorities

copy 2020 Darling Consulting Group Inc Page 5

Regulatory Radar

Liquid asset pressure

Cash minimums

Risk monitoring

Documentation and assumptions support

Board communication and education

Dynamic forecasting

Stress testing

Common Areas of Feedback

copy 2020 Darling Consulting Group Inc Page 6

ESTABLISHING A TOTAL LIQUIDITY SOLUTION

copy 2020 Darling Consulting Group Inc Page 7

ldquoTraditionalrdquo Measures

The Ability to Raise Cash Quickly at a Reasonable Cost

and Without Principal Loss

Wholesale Funding Reliance

Cash + Short-term

Investments

LoanShares

Theory vs PracticeDoes the Definition Fit

copy 2020 Darling Consulting Group Inc Page 8

Total Liquidity Solution

Balance Sheet Liquidity

bull Cash and Securities

Just in Time Inventory

bull FHLB Borrowings

Strategic Reserve

bull Non-Member Deposits

Catastrophe Insurance

bull FRB Borrowings

Liquidity Stress Testing amp Contingency Funding Plan

bullRisk TriggersMonitoringbullStress ScenariosbullRelief StrategiesbullContingency Funding Plan

90-Day Forecasting

bullNet Loan Growth ExpectedbullNet Deposit Growth ExpectedbullProjected Cash Flow from Investment and Wholesale Funding Portfolios

Establish Appropriate Policies

copy 2020 Darling Consulting Group Inc Page 9

Liquidity Management Impact

Loan Strategy

Deposit Pricing

Strategy

Investment Strategy

Growth Strategy Earnings

A Credit Unionrsquos Perspective on Liquidity Will Impact

copy 2020 Darling Consulting Group Inc Page 10

REDEFINING LIQUID ASSETS

copy 2020 Darling Consulting Group Inc Page 11

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

I LIQUID ASSETS

30000500000

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

0 0 0

10000 20000 0

0 0 0

0 0 00 0 0

0 0 00 0 0

0

10000 19000 0

29000

0

Pct Of Assets15000

74000 148

Redefining Liquid AssetsBasic Surplus Liquid Assets

Cash + ST InvestmentsAssetsShortfalls

Forces to hold more cash Could increase IRR exposure to

falling rates Focuses more on cash flow vs

collateral (needing to wait for cash to come due)

Ultimately can hurt NII

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 12

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

I LIQUID ASSETS

10000500000

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

0 0 0

10000 45000 0

0 0 0

0 0 00 0 0

0 0 00 0 0

0

10000 42750 0

52750

0

Pct Of Assets10000

72750 146

Redefining Liquid Assets

Collateral-Based Approach Focuses on ability to access cash

quickly Optimizes liquidity yield

What is a comfortable level for our CU

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 13

NII Impact on Cash Extension

Add 100bps of spread Protect against falling rates Maintain relative sensitivity to rising rates Neutral liquid asset shift

copy 2020 Darling Consulting Group Inc Page 14

If ldquostrongerrdquo liquid assets then consider

Keep cash to work Identify ability to shift liquidity into

loans Consider more of a defensive deposit

strategy Maximize alternative funding sources Develop a strong contingency funding

plan

If ldquotighterrdquo liquid assets then consider

Define liquid asset cushion May have to be more offensive in

deposit pricing strategies Maximize alternative funding sources Defend with ldquototalrdquo liquidity (next slide)

Strategy Considerations

copy 2020 Darling Consulting Group Inc Page 15

FOCUSING ON TOTAL LIQUIDITY

copy 2020 Darling Consulting Group Inc Page 16

Total Liquidity FocusBasic Surplus Total Liquidity

Reserve based on funding concentrations

Available borrowing capacity vs wholesale reliance

Non-Member CD capacity

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB

Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)Current Brokered Deposit Balances

REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS

BASIC SURPLUS W FHLB amp BROKERED DEPOSITS

10 30000

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 250030 2500

III QUALIFYING FHLB LOAN COLLATERAL

175000125000

35000

37750 76

112750 226

IV BROKERED DEPOSIT ACCESS

12500050000

75000

500000

50000

162750 326

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 17

Strategy Shift CashInvestments into Loans

Shifting cash into loans will reduce liquid assets but can increase spread by +2-3 with a minimal impact to total liquidity

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB 103500 207

14450050000

94500

III QUALIFYING FHLB LOAN COLLATERAL

175000144500

35000

9000 18

30 250010 30000

88

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 2500

0

Pct Of Assets15000

44000

0

10000 19000 0

29000

0 0 00 0 00 0 0

0 0 00 0 0

0 0 0

10000 20000 0

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

I LIQUID ASSETS

0500000

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 18

NII Impact on Holding Mortgages

Year Base Δ NII

1 $1459

2 $1773

Total $3232

50 Increase in NII over 3 Years

March 2019 March 2016

Page 19copy 2019 Darling Consulting Group Inc

Policy Discussion

Discuss if certain policies are needed such as Cash + ST InvestmentsAssets LoansShares

Discuss Policy Guidelines Liquid Assets Total Liquidity

Discuss Wholesale Funding comfort levels FHLB Non-Member Deposits Total Wholesale

Page 20copy 2019 Darling Consulting Group Inc

DCG Contingency Funding PlanhellipWhatrsquos IncludedCFP Table of Contents

copy 2020 Darling Consulting Group Inc Page 21

DEVELOPING A DYNAMIC FORECASTamp STRESS TEST FRAMEWORK

copy 2020 Darling Consulting Group Inc Page 22

Dynamic Liquidity Forecast

Source Liquidity360degreg

$140MM Loan Growth$70MM Deposit Growth$70MM Borrowings

copy 2020 Darling Consulting Group Inc Page 23

Total Liquidity vs Call Report Ratios

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													0																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													44000								88
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			9000							18
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												144500
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												144500
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													94500
																																			BASIC SURPLUS W FHLB			103500							207
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			153500							307

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													30000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													74000								148
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			39000							78
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			114000							228
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			164000							328

copy 2020 Darling Consulting Group Inc Page 4

Regulatory Radar2020 NCUA Priorities

ldquoOn average credit union balance sheets continue to exhibit lower levels of on-balance-sheet liquidityhellipfor credit unions with low levels of on-balance sheet liquidity examiners

will assess liquidity management by evaluating

-The potential effects of changing interest rates on market value and borrowing capacityhellip-Scenario analysis for liquidity risk modelinghellip-The appropriateness of contingency fundinghelliprdquo

- 20-CU-01 NCUA 2020 Supervisory Priorities

copy 2020 Darling Consulting Group Inc Page 5

Regulatory Radar

Liquid asset pressure

Cash minimums

Risk monitoring

Documentation and assumptions support

Board communication and education

Dynamic forecasting

Stress testing

Common Areas of Feedback

copy 2020 Darling Consulting Group Inc Page 6

ESTABLISHING A TOTAL LIQUIDITY SOLUTION

copy 2020 Darling Consulting Group Inc Page 7

ldquoTraditionalrdquo Measures

The Ability to Raise Cash Quickly at a Reasonable Cost

and Without Principal Loss

Wholesale Funding Reliance

Cash + Short-term

Investments

LoanShares

Theory vs PracticeDoes the Definition Fit

copy 2020 Darling Consulting Group Inc Page 8

Total Liquidity Solution

Balance Sheet Liquidity

bull Cash and Securities

Just in Time Inventory

bull FHLB Borrowings

Strategic Reserve

bull Non-Member Deposits

Catastrophe Insurance

bull FRB Borrowings

Liquidity Stress Testing amp Contingency Funding Plan

bullRisk TriggersMonitoringbullStress ScenariosbullRelief StrategiesbullContingency Funding Plan

90-Day Forecasting

bullNet Loan Growth ExpectedbullNet Deposit Growth ExpectedbullProjected Cash Flow from Investment and Wholesale Funding Portfolios

Establish Appropriate Policies

copy 2020 Darling Consulting Group Inc Page 9

Liquidity Management Impact

Loan Strategy

Deposit Pricing

Strategy

Investment Strategy

Growth Strategy Earnings

A Credit Unionrsquos Perspective on Liquidity Will Impact

copy 2020 Darling Consulting Group Inc Page 10

REDEFINING LIQUID ASSETS

copy 2020 Darling Consulting Group Inc Page 11

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

I LIQUID ASSETS

30000500000

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

0 0 0

10000 20000 0

0 0 0

0 0 00 0 0

0 0 00 0 0

0

10000 19000 0

29000

0

Pct Of Assets15000

74000 148

Redefining Liquid AssetsBasic Surplus Liquid Assets

Cash + ST InvestmentsAssetsShortfalls

Forces to hold more cash Could increase IRR exposure to

falling rates Focuses more on cash flow vs

collateral (needing to wait for cash to come due)

Ultimately can hurt NII

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 12

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

I LIQUID ASSETS

10000500000

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

0 0 0

10000 45000 0

0 0 0

0 0 00 0 0

0 0 00 0 0

0

10000 42750 0

52750

0

Pct Of Assets10000

72750 146

Redefining Liquid Assets

Collateral-Based Approach Focuses on ability to access cash

quickly Optimizes liquidity yield

What is a comfortable level for our CU

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 13

NII Impact on Cash Extension

Add 100bps of spread Protect against falling rates Maintain relative sensitivity to rising rates Neutral liquid asset shift

copy 2020 Darling Consulting Group Inc Page 14

If ldquostrongerrdquo liquid assets then consider

Keep cash to work Identify ability to shift liquidity into

loans Consider more of a defensive deposit

strategy Maximize alternative funding sources Develop a strong contingency funding

plan

If ldquotighterrdquo liquid assets then consider

Define liquid asset cushion May have to be more offensive in

deposit pricing strategies Maximize alternative funding sources Defend with ldquototalrdquo liquidity (next slide)

Strategy Considerations

copy 2020 Darling Consulting Group Inc Page 15

FOCUSING ON TOTAL LIQUIDITY

copy 2020 Darling Consulting Group Inc Page 16

Total Liquidity FocusBasic Surplus Total Liquidity

Reserve based on funding concentrations

Available borrowing capacity vs wholesale reliance

Non-Member CD capacity

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB

Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)Current Brokered Deposit Balances

REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS

BASIC SURPLUS W FHLB amp BROKERED DEPOSITS

10 30000

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 250030 2500

III QUALIFYING FHLB LOAN COLLATERAL

175000125000

35000

37750 76

112750 226

IV BROKERED DEPOSIT ACCESS

12500050000

75000

500000

50000

162750 326

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 17

Strategy Shift CashInvestments into Loans

Shifting cash into loans will reduce liquid assets but can increase spread by +2-3 with a minimal impact to total liquidity

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB 103500 207

14450050000

94500

III QUALIFYING FHLB LOAN COLLATERAL

175000144500

35000

9000 18

30 250010 30000

88

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 2500

0

Pct Of Assets15000

44000

0

10000 19000 0

29000

0 0 00 0 00 0 0

0 0 00 0 0

0 0 0

10000 20000 0

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

I LIQUID ASSETS

0500000

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 18

NII Impact on Holding Mortgages

Year Base Δ NII

1 $1459

2 $1773

Total $3232

50 Increase in NII over 3 Years

March 2019 March 2016

Page 19copy 2019 Darling Consulting Group Inc

Policy Discussion

Discuss if certain policies are needed such as Cash + ST InvestmentsAssets LoansShares

Discuss Policy Guidelines Liquid Assets Total Liquidity

Discuss Wholesale Funding comfort levels FHLB Non-Member Deposits Total Wholesale

Page 20copy 2019 Darling Consulting Group Inc

DCG Contingency Funding PlanhellipWhatrsquos IncludedCFP Table of Contents

copy 2020 Darling Consulting Group Inc Page 21

DEVELOPING A DYNAMIC FORECASTamp STRESS TEST FRAMEWORK

copy 2020 Darling Consulting Group Inc Page 22

Dynamic Liquidity Forecast

Source Liquidity360degreg

$140MM Loan Growth$70MM Deposit Growth$70MM Borrowings

copy 2020 Darling Consulting Group Inc Page 23

Total Liquidity vs Call Report Ratios

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													0																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													44000								88
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			9000							18
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												144500
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												144500
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													94500
																																			BASIC SURPLUS W FHLB			103500							207
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			153500							307

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													30000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													74000								148
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			39000							78
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			114000							228
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			164000							328

copy 2020 Darling Consulting Group Inc Page 5

Regulatory Radar

Liquid asset pressure

Cash minimums

Risk monitoring

Documentation and assumptions support

Board communication and education

Dynamic forecasting

Stress testing

Common Areas of Feedback

copy 2020 Darling Consulting Group Inc Page 6

ESTABLISHING A TOTAL LIQUIDITY SOLUTION

copy 2020 Darling Consulting Group Inc Page 7

ldquoTraditionalrdquo Measures

The Ability to Raise Cash Quickly at a Reasonable Cost

and Without Principal Loss

Wholesale Funding Reliance

Cash + Short-term

Investments

LoanShares

Theory vs PracticeDoes the Definition Fit

copy 2020 Darling Consulting Group Inc Page 8

Total Liquidity Solution

Balance Sheet Liquidity

bull Cash and Securities

Just in Time Inventory

bull FHLB Borrowings

Strategic Reserve

bull Non-Member Deposits

Catastrophe Insurance

bull FRB Borrowings

Liquidity Stress Testing amp Contingency Funding Plan

bullRisk TriggersMonitoringbullStress ScenariosbullRelief StrategiesbullContingency Funding Plan

90-Day Forecasting

bullNet Loan Growth ExpectedbullNet Deposit Growth ExpectedbullProjected Cash Flow from Investment and Wholesale Funding Portfolios

Establish Appropriate Policies

copy 2020 Darling Consulting Group Inc Page 9

Liquidity Management Impact

Loan Strategy

Deposit Pricing

Strategy

Investment Strategy

Growth Strategy Earnings

A Credit Unionrsquos Perspective on Liquidity Will Impact

copy 2020 Darling Consulting Group Inc Page 10

REDEFINING LIQUID ASSETS

copy 2020 Darling Consulting Group Inc Page 11

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

I LIQUID ASSETS

30000500000

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

0 0 0

10000 20000 0

0 0 0

0 0 00 0 0

0 0 00 0 0

0

10000 19000 0

29000

0

Pct Of Assets15000

74000 148

Redefining Liquid AssetsBasic Surplus Liquid Assets

Cash + ST InvestmentsAssetsShortfalls

Forces to hold more cash Could increase IRR exposure to

falling rates Focuses more on cash flow vs

collateral (needing to wait for cash to come due)

Ultimately can hurt NII

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 12

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

I LIQUID ASSETS

10000500000

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

0 0 0

10000 45000 0

0 0 0

0 0 00 0 0

0 0 00 0 0

0

10000 42750 0

52750

0

Pct Of Assets10000

72750 146

Redefining Liquid Assets

Collateral-Based Approach Focuses on ability to access cash

quickly Optimizes liquidity yield

What is a comfortable level for our CU

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 13

NII Impact on Cash Extension

Add 100bps of spread Protect against falling rates Maintain relative sensitivity to rising rates Neutral liquid asset shift

copy 2020 Darling Consulting Group Inc Page 14

If ldquostrongerrdquo liquid assets then consider

Keep cash to work Identify ability to shift liquidity into

loans Consider more of a defensive deposit

strategy Maximize alternative funding sources Develop a strong contingency funding

plan

If ldquotighterrdquo liquid assets then consider

Define liquid asset cushion May have to be more offensive in

deposit pricing strategies Maximize alternative funding sources Defend with ldquototalrdquo liquidity (next slide)

Strategy Considerations

copy 2020 Darling Consulting Group Inc Page 15

FOCUSING ON TOTAL LIQUIDITY

copy 2020 Darling Consulting Group Inc Page 16

Total Liquidity FocusBasic Surplus Total Liquidity

Reserve based on funding concentrations

Available borrowing capacity vs wholesale reliance

Non-Member CD capacity

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB

Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)Current Brokered Deposit Balances

REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS

BASIC SURPLUS W FHLB amp BROKERED DEPOSITS

10 30000

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 250030 2500

III QUALIFYING FHLB LOAN COLLATERAL

175000125000

35000

37750 76

112750 226

IV BROKERED DEPOSIT ACCESS

12500050000

75000

500000

50000

162750 326

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 17

Strategy Shift CashInvestments into Loans

Shifting cash into loans will reduce liquid assets but can increase spread by +2-3 with a minimal impact to total liquidity

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB 103500 207

14450050000

94500

III QUALIFYING FHLB LOAN COLLATERAL

175000144500

35000

9000 18

30 250010 30000

88

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 2500

0

Pct Of Assets15000

44000

0

10000 19000 0

29000

0 0 00 0 00 0 0

0 0 00 0 0

0 0 0

10000 20000 0

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

I LIQUID ASSETS

0500000

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 18

NII Impact on Holding Mortgages

Year Base Δ NII

1 $1459

2 $1773

Total $3232

50 Increase in NII over 3 Years

March 2019 March 2016

Page 19copy 2019 Darling Consulting Group Inc

Policy Discussion

Discuss if certain policies are needed such as Cash + ST InvestmentsAssets LoansShares

Discuss Policy Guidelines Liquid Assets Total Liquidity

Discuss Wholesale Funding comfort levels FHLB Non-Member Deposits Total Wholesale

Page 20copy 2019 Darling Consulting Group Inc

DCG Contingency Funding PlanhellipWhatrsquos IncludedCFP Table of Contents

copy 2020 Darling Consulting Group Inc Page 21

DEVELOPING A DYNAMIC FORECASTamp STRESS TEST FRAMEWORK

copy 2020 Darling Consulting Group Inc Page 22

Dynamic Liquidity Forecast

Source Liquidity360degreg

$140MM Loan Growth$70MM Deposit Growth$70MM Borrowings

copy 2020 Darling Consulting Group Inc Page 23

Total Liquidity vs Call Report Ratios

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													0																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													44000								88
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			9000							18
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												144500
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												144500
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													94500
																																			BASIC SURPLUS W FHLB			103500							207
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			153500							307

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													30000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													74000								148
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			39000							78
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			114000							228
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			164000							328

copy 2020 Darling Consulting Group Inc Page 6

ESTABLISHING A TOTAL LIQUIDITY SOLUTION

copy 2020 Darling Consulting Group Inc Page 7

ldquoTraditionalrdquo Measures

The Ability to Raise Cash Quickly at a Reasonable Cost

and Without Principal Loss

Wholesale Funding Reliance

Cash + Short-term

Investments

LoanShares

Theory vs PracticeDoes the Definition Fit

copy 2020 Darling Consulting Group Inc Page 8

Total Liquidity Solution

Balance Sheet Liquidity

bull Cash and Securities

Just in Time Inventory

bull FHLB Borrowings

Strategic Reserve

bull Non-Member Deposits

Catastrophe Insurance

bull FRB Borrowings

Liquidity Stress Testing amp Contingency Funding Plan

bullRisk TriggersMonitoringbullStress ScenariosbullRelief StrategiesbullContingency Funding Plan

90-Day Forecasting

bullNet Loan Growth ExpectedbullNet Deposit Growth ExpectedbullProjected Cash Flow from Investment and Wholesale Funding Portfolios

Establish Appropriate Policies

copy 2020 Darling Consulting Group Inc Page 9

Liquidity Management Impact

Loan Strategy

Deposit Pricing

Strategy

Investment Strategy

Growth Strategy Earnings

A Credit Unionrsquos Perspective on Liquidity Will Impact

copy 2020 Darling Consulting Group Inc Page 10

REDEFINING LIQUID ASSETS

copy 2020 Darling Consulting Group Inc Page 11

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

I LIQUID ASSETS

30000500000

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

0 0 0

10000 20000 0

0 0 0

0 0 00 0 0

0 0 00 0 0

0

10000 19000 0

29000

0

Pct Of Assets15000

74000 148

Redefining Liquid AssetsBasic Surplus Liquid Assets

Cash + ST InvestmentsAssetsShortfalls

Forces to hold more cash Could increase IRR exposure to

falling rates Focuses more on cash flow vs

collateral (needing to wait for cash to come due)

Ultimately can hurt NII

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 12

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

I LIQUID ASSETS

10000500000

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

0 0 0

10000 45000 0

0 0 0

0 0 00 0 0

0 0 00 0 0

0

10000 42750 0

52750

0

Pct Of Assets10000

72750 146

Redefining Liquid Assets

Collateral-Based Approach Focuses on ability to access cash

quickly Optimizes liquidity yield

What is a comfortable level for our CU

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 13

NII Impact on Cash Extension

Add 100bps of spread Protect against falling rates Maintain relative sensitivity to rising rates Neutral liquid asset shift

copy 2020 Darling Consulting Group Inc Page 14

If ldquostrongerrdquo liquid assets then consider

Keep cash to work Identify ability to shift liquidity into

loans Consider more of a defensive deposit

strategy Maximize alternative funding sources Develop a strong contingency funding

plan

If ldquotighterrdquo liquid assets then consider

Define liquid asset cushion May have to be more offensive in

deposit pricing strategies Maximize alternative funding sources Defend with ldquototalrdquo liquidity (next slide)

Strategy Considerations

copy 2020 Darling Consulting Group Inc Page 15

FOCUSING ON TOTAL LIQUIDITY

copy 2020 Darling Consulting Group Inc Page 16

Total Liquidity FocusBasic Surplus Total Liquidity

Reserve based on funding concentrations

Available borrowing capacity vs wholesale reliance

Non-Member CD capacity

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB

Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)Current Brokered Deposit Balances

REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS

BASIC SURPLUS W FHLB amp BROKERED DEPOSITS

10 30000

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 250030 2500

III QUALIFYING FHLB LOAN COLLATERAL

175000125000

35000

37750 76

112750 226

IV BROKERED DEPOSIT ACCESS

12500050000

75000

500000

50000

162750 326

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 17

Strategy Shift CashInvestments into Loans

Shifting cash into loans will reduce liquid assets but can increase spread by +2-3 with a minimal impact to total liquidity

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB 103500 207

14450050000

94500

III QUALIFYING FHLB LOAN COLLATERAL

175000144500

35000

9000 18

30 250010 30000

88

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 2500

0

Pct Of Assets15000

44000

0

10000 19000 0

29000

0 0 00 0 00 0 0

0 0 00 0 0

0 0 0

10000 20000 0

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

I LIQUID ASSETS

0500000

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 18

NII Impact on Holding Mortgages

Year Base Δ NII

1 $1459

2 $1773

Total $3232

50 Increase in NII over 3 Years

March 2019 March 2016

Page 19copy 2019 Darling Consulting Group Inc

Policy Discussion

Discuss if certain policies are needed such as Cash + ST InvestmentsAssets LoansShares

Discuss Policy Guidelines Liquid Assets Total Liquidity

Discuss Wholesale Funding comfort levels FHLB Non-Member Deposits Total Wholesale

Page 20copy 2019 Darling Consulting Group Inc

DCG Contingency Funding PlanhellipWhatrsquos IncludedCFP Table of Contents

copy 2020 Darling Consulting Group Inc Page 21

DEVELOPING A DYNAMIC FORECASTamp STRESS TEST FRAMEWORK

copy 2020 Darling Consulting Group Inc Page 22

Dynamic Liquidity Forecast

Source Liquidity360degreg

$140MM Loan Growth$70MM Deposit Growth$70MM Borrowings

copy 2020 Darling Consulting Group Inc Page 23

Total Liquidity vs Call Report Ratios

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													0																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													44000								88
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			9000							18
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												144500
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												144500
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													94500
																																			BASIC SURPLUS W FHLB			103500							207
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			153500							307

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													30000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													74000								148
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			39000							78
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			114000							228
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			164000							328

copy 2020 Darling Consulting Group Inc Page 7

ldquoTraditionalrdquo Measures

The Ability to Raise Cash Quickly at a Reasonable Cost

and Without Principal Loss

Wholesale Funding Reliance

Cash + Short-term

Investments

LoanShares

Theory vs PracticeDoes the Definition Fit

copy 2020 Darling Consulting Group Inc Page 8

Total Liquidity Solution

Balance Sheet Liquidity

bull Cash and Securities

Just in Time Inventory

bull FHLB Borrowings

Strategic Reserve

bull Non-Member Deposits

Catastrophe Insurance

bull FRB Borrowings

Liquidity Stress Testing amp Contingency Funding Plan

bullRisk TriggersMonitoringbullStress ScenariosbullRelief StrategiesbullContingency Funding Plan

90-Day Forecasting

bullNet Loan Growth ExpectedbullNet Deposit Growth ExpectedbullProjected Cash Flow from Investment and Wholesale Funding Portfolios

Establish Appropriate Policies

copy 2020 Darling Consulting Group Inc Page 9

Liquidity Management Impact

Loan Strategy

Deposit Pricing

Strategy

Investment Strategy

Growth Strategy Earnings

A Credit Unionrsquos Perspective on Liquidity Will Impact

copy 2020 Darling Consulting Group Inc Page 10

REDEFINING LIQUID ASSETS

copy 2020 Darling Consulting Group Inc Page 11

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

I LIQUID ASSETS

30000500000

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

0 0 0

10000 20000 0

0 0 0

0 0 00 0 0

0 0 00 0 0

0

10000 19000 0

29000

0

Pct Of Assets15000

74000 148

Redefining Liquid AssetsBasic Surplus Liquid Assets

Cash + ST InvestmentsAssetsShortfalls

Forces to hold more cash Could increase IRR exposure to

falling rates Focuses more on cash flow vs

collateral (needing to wait for cash to come due)

Ultimately can hurt NII

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 12

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

I LIQUID ASSETS

10000500000

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

0 0 0

10000 45000 0

0 0 0

0 0 00 0 0

0 0 00 0 0

0

10000 42750 0

52750

0

Pct Of Assets10000

72750 146

Redefining Liquid Assets

Collateral-Based Approach Focuses on ability to access cash

quickly Optimizes liquidity yield

What is a comfortable level for our CU

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 13

NII Impact on Cash Extension

Add 100bps of spread Protect against falling rates Maintain relative sensitivity to rising rates Neutral liquid asset shift

copy 2020 Darling Consulting Group Inc Page 14

If ldquostrongerrdquo liquid assets then consider

Keep cash to work Identify ability to shift liquidity into

loans Consider more of a defensive deposit

strategy Maximize alternative funding sources Develop a strong contingency funding

plan

If ldquotighterrdquo liquid assets then consider

Define liquid asset cushion May have to be more offensive in

deposit pricing strategies Maximize alternative funding sources Defend with ldquototalrdquo liquidity (next slide)

Strategy Considerations

copy 2020 Darling Consulting Group Inc Page 15

FOCUSING ON TOTAL LIQUIDITY

copy 2020 Darling Consulting Group Inc Page 16

Total Liquidity FocusBasic Surplus Total Liquidity

Reserve based on funding concentrations

Available borrowing capacity vs wholesale reliance

Non-Member CD capacity

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB

Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)Current Brokered Deposit Balances

REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS

BASIC SURPLUS W FHLB amp BROKERED DEPOSITS

10 30000

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 250030 2500

III QUALIFYING FHLB LOAN COLLATERAL

175000125000

35000

37750 76

112750 226

IV BROKERED DEPOSIT ACCESS

12500050000

75000

500000

50000

162750 326

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 17

Strategy Shift CashInvestments into Loans

Shifting cash into loans will reduce liquid assets but can increase spread by +2-3 with a minimal impact to total liquidity

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB 103500 207

14450050000

94500

III QUALIFYING FHLB LOAN COLLATERAL

175000144500

35000

9000 18

30 250010 30000

88

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 2500

0

Pct Of Assets15000

44000

0

10000 19000 0

29000

0 0 00 0 00 0 0

0 0 00 0 0

0 0 0

10000 20000 0

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

I LIQUID ASSETS

0500000

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 18

NII Impact on Holding Mortgages

Year Base Δ NII

1 $1459

2 $1773

Total $3232

50 Increase in NII over 3 Years

March 2019 March 2016

Page 19copy 2019 Darling Consulting Group Inc

Policy Discussion

Discuss if certain policies are needed such as Cash + ST InvestmentsAssets LoansShares

Discuss Policy Guidelines Liquid Assets Total Liquidity

Discuss Wholesale Funding comfort levels FHLB Non-Member Deposits Total Wholesale

Page 20copy 2019 Darling Consulting Group Inc

DCG Contingency Funding PlanhellipWhatrsquos IncludedCFP Table of Contents

copy 2020 Darling Consulting Group Inc Page 21

DEVELOPING A DYNAMIC FORECASTamp STRESS TEST FRAMEWORK

copy 2020 Darling Consulting Group Inc Page 22

Dynamic Liquidity Forecast

Source Liquidity360degreg

$140MM Loan Growth$70MM Deposit Growth$70MM Borrowings

copy 2020 Darling Consulting Group Inc Page 23

Total Liquidity vs Call Report Ratios

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													0																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													44000								88
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			9000							18
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												144500
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												144500
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													94500
																																			BASIC SURPLUS W FHLB			103500							207
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			153500							307

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													30000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													74000								148
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			39000							78
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			114000							228
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			164000							328

copy 2020 Darling Consulting Group Inc Page 8

Total Liquidity Solution

Balance Sheet Liquidity

bull Cash and Securities

Just in Time Inventory

bull FHLB Borrowings

Strategic Reserve

bull Non-Member Deposits

Catastrophe Insurance

bull FRB Borrowings

Liquidity Stress Testing amp Contingency Funding Plan

bullRisk TriggersMonitoringbullStress ScenariosbullRelief StrategiesbullContingency Funding Plan

90-Day Forecasting

bullNet Loan Growth ExpectedbullNet Deposit Growth ExpectedbullProjected Cash Flow from Investment and Wholesale Funding Portfolios

Establish Appropriate Policies

copy 2020 Darling Consulting Group Inc Page 9

Liquidity Management Impact

Loan Strategy

Deposit Pricing

Strategy

Investment Strategy

Growth Strategy Earnings

A Credit Unionrsquos Perspective on Liquidity Will Impact

copy 2020 Darling Consulting Group Inc Page 10

REDEFINING LIQUID ASSETS

copy 2020 Darling Consulting Group Inc Page 11

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

I LIQUID ASSETS

30000500000

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

0 0 0

10000 20000 0

0 0 0

0 0 00 0 0

0 0 00 0 0

0

10000 19000 0

29000

0

Pct Of Assets15000

74000 148

Redefining Liquid AssetsBasic Surplus Liquid Assets

Cash + ST InvestmentsAssetsShortfalls

Forces to hold more cash Could increase IRR exposure to

falling rates Focuses more on cash flow vs

collateral (needing to wait for cash to come due)

Ultimately can hurt NII

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 12

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

I LIQUID ASSETS

10000500000

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

0 0 0

10000 45000 0

0 0 0

0 0 00 0 0

0 0 00 0 0

0

10000 42750 0

52750

0

Pct Of Assets10000

72750 146

Redefining Liquid Assets

Collateral-Based Approach Focuses on ability to access cash

quickly Optimizes liquidity yield

What is a comfortable level for our CU

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 13

NII Impact on Cash Extension

Add 100bps of spread Protect against falling rates Maintain relative sensitivity to rising rates Neutral liquid asset shift

copy 2020 Darling Consulting Group Inc Page 14

If ldquostrongerrdquo liquid assets then consider

Keep cash to work Identify ability to shift liquidity into

loans Consider more of a defensive deposit

strategy Maximize alternative funding sources Develop a strong contingency funding

plan

If ldquotighterrdquo liquid assets then consider

Define liquid asset cushion May have to be more offensive in

deposit pricing strategies Maximize alternative funding sources Defend with ldquototalrdquo liquidity (next slide)

Strategy Considerations

copy 2020 Darling Consulting Group Inc Page 15

FOCUSING ON TOTAL LIQUIDITY

copy 2020 Darling Consulting Group Inc Page 16

Total Liquidity FocusBasic Surplus Total Liquidity

Reserve based on funding concentrations

Available borrowing capacity vs wholesale reliance

Non-Member CD capacity

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB

Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)Current Brokered Deposit Balances

REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS

BASIC SURPLUS W FHLB amp BROKERED DEPOSITS

10 30000

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 250030 2500

III QUALIFYING FHLB LOAN COLLATERAL

175000125000

35000

37750 76

112750 226

IV BROKERED DEPOSIT ACCESS

12500050000

75000

500000

50000

162750 326

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 17

Strategy Shift CashInvestments into Loans

Shifting cash into loans will reduce liquid assets but can increase spread by +2-3 with a minimal impact to total liquidity

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB 103500 207

14450050000

94500

III QUALIFYING FHLB LOAN COLLATERAL

175000144500

35000

9000 18

30 250010 30000

88

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 2500

0

Pct Of Assets15000

44000

0

10000 19000 0

29000

0 0 00 0 00 0 0

0 0 00 0 0

0 0 0

10000 20000 0

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

I LIQUID ASSETS

0500000

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 18

NII Impact on Holding Mortgages

Year Base Δ NII

1 $1459

2 $1773

Total $3232

50 Increase in NII over 3 Years

March 2019 March 2016

Page 19copy 2019 Darling Consulting Group Inc

Policy Discussion

Discuss if certain policies are needed such as Cash + ST InvestmentsAssets LoansShares

Discuss Policy Guidelines Liquid Assets Total Liquidity

Discuss Wholesale Funding comfort levels FHLB Non-Member Deposits Total Wholesale

Page 20copy 2019 Darling Consulting Group Inc

DCG Contingency Funding PlanhellipWhatrsquos IncludedCFP Table of Contents

copy 2020 Darling Consulting Group Inc Page 21

DEVELOPING A DYNAMIC FORECASTamp STRESS TEST FRAMEWORK

copy 2020 Darling Consulting Group Inc Page 22

Dynamic Liquidity Forecast

Source Liquidity360degreg

$140MM Loan Growth$70MM Deposit Growth$70MM Borrowings

copy 2020 Darling Consulting Group Inc Page 23

Total Liquidity vs Call Report Ratios

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													0																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													44000								88
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			9000							18
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												144500
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												144500
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													94500
																																			BASIC SURPLUS W FHLB			103500							207
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			153500							307

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													30000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													74000								148
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			39000							78
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			114000							228
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			164000							328

copy 2020 Darling Consulting Group Inc Page 9

Liquidity Management Impact

Loan Strategy

Deposit Pricing

Strategy

Investment Strategy

Growth Strategy Earnings

A Credit Unionrsquos Perspective on Liquidity Will Impact

copy 2020 Darling Consulting Group Inc Page 10

REDEFINING LIQUID ASSETS

copy 2020 Darling Consulting Group Inc Page 11

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

I LIQUID ASSETS

30000500000

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

0 0 0

10000 20000 0

0 0 0

0 0 00 0 0

0 0 00 0 0

0

10000 19000 0

29000

0

Pct Of Assets15000

74000 148

Redefining Liquid AssetsBasic Surplus Liquid Assets

Cash + ST InvestmentsAssetsShortfalls

Forces to hold more cash Could increase IRR exposure to

falling rates Focuses more on cash flow vs

collateral (needing to wait for cash to come due)

Ultimately can hurt NII

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 12

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

I LIQUID ASSETS

10000500000

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

0 0 0

10000 45000 0

0 0 0

0 0 00 0 0

0 0 00 0 0

0

10000 42750 0

52750

0

Pct Of Assets10000

72750 146

Redefining Liquid Assets

Collateral-Based Approach Focuses on ability to access cash

quickly Optimizes liquidity yield

What is a comfortable level for our CU

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 13

NII Impact on Cash Extension

Add 100bps of spread Protect against falling rates Maintain relative sensitivity to rising rates Neutral liquid asset shift

copy 2020 Darling Consulting Group Inc Page 14

If ldquostrongerrdquo liquid assets then consider

Keep cash to work Identify ability to shift liquidity into

loans Consider more of a defensive deposit

strategy Maximize alternative funding sources Develop a strong contingency funding

plan

If ldquotighterrdquo liquid assets then consider

Define liquid asset cushion May have to be more offensive in

deposit pricing strategies Maximize alternative funding sources Defend with ldquototalrdquo liquidity (next slide)

Strategy Considerations

copy 2020 Darling Consulting Group Inc Page 15

FOCUSING ON TOTAL LIQUIDITY

copy 2020 Darling Consulting Group Inc Page 16

Total Liquidity FocusBasic Surplus Total Liquidity

Reserve based on funding concentrations

Available borrowing capacity vs wholesale reliance

Non-Member CD capacity

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB

Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)Current Brokered Deposit Balances

REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS

BASIC SURPLUS W FHLB amp BROKERED DEPOSITS

10 30000

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 250030 2500

III QUALIFYING FHLB LOAN COLLATERAL

175000125000

35000

37750 76

112750 226

IV BROKERED DEPOSIT ACCESS

12500050000

75000

500000

50000

162750 326

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 17

Strategy Shift CashInvestments into Loans

Shifting cash into loans will reduce liquid assets but can increase spread by +2-3 with a minimal impact to total liquidity

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB 103500 207

14450050000

94500

III QUALIFYING FHLB LOAN COLLATERAL

175000144500

35000

9000 18

30 250010 30000

88

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 2500

0

Pct Of Assets15000

44000

0

10000 19000 0

29000

0 0 00 0 00 0 0

0 0 00 0 0

0 0 0

10000 20000 0

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

I LIQUID ASSETS

0500000

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 18

NII Impact on Holding Mortgages

Year Base Δ NII

1 $1459

2 $1773

Total $3232

50 Increase in NII over 3 Years

March 2019 March 2016

Page 19copy 2019 Darling Consulting Group Inc

Policy Discussion

Discuss if certain policies are needed such as Cash + ST InvestmentsAssets LoansShares

Discuss Policy Guidelines Liquid Assets Total Liquidity

Discuss Wholesale Funding comfort levels FHLB Non-Member Deposits Total Wholesale

Page 20copy 2019 Darling Consulting Group Inc

DCG Contingency Funding PlanhellipWhatrsquos IncludedCFP Table of Contents

copy 2020 Darling Consulting Group Inc Page 21

DEVELOPING A DYNAMIC FORECASTamp STRESS TEST FRAMEWORK

copy 2020 Darling Consulting Group Inc Page 22

Dynamic Liquidity Forecast

Source Liquidity360degreg

$140MM Loan Growth$70MM Deposit Growth$70MM Borrowings

copy 2020 Darling Consulting Group Inc Page 23

Total Liquidity vs Call Report Ratios

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													0																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													44000								88
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			9000							18
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												144500
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												144500
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													94500
																																			BASIC SURPLUS W FHLB			103500							207
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			153500							307

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													30000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													74000								148
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			39000							78
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			114000							228
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			164000							328

copy 2020 Darling Consulting Group Inc Page 10

REDEFINING LIQUID ASSETS

copy 2020 Darling Consulting Group Inc Page 11

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

I LIQUID ASSETS

30000500000

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

0 0 0

10000 20000 0

0 0 0

0 0 00 0 0

0 0 00 0 0

0

10000 19000 0

29000

0

Pct Of Assets15000

74000 148

Redefining Liquid AssetsBasic Surplus Liquid Assets

Cash + ST InvestmentsAssetsShortfalls

Forces to hold more cash Could increase IRR exposure to

falling rates Focuses more on cash flow vs

collateral (needing to wait for cash to come due)

Ultimately can hurt NII

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 12

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

I LIQUID ASSETS

10000500000

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

0 0 0

10000 45000 0

0 0 0

0 0 00 0 0

0 0 00 0 0

0

10000 42750 0

52750

0

Pct Of Assets10000

72750 146

Redefining Liquid Assets

Collateral-Based Approach Focuses on ability to access cash

quickly Optimizes liquidity yield

What is a comfortable level for our CU

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 13

NII Impact on Cash Extension

Add 100bps of spread Protect against falling rates Maintain relative sensitivity to rising rates Neutral liquid asset shift

copy 2020 Darling Consulting Group Inc Page 14

If ldquostrongerrdquo liquid assets then consider

Keep cash to work Identify ability to shift liquidity into

loans Consider more of a defensive deposit

strategy Maximize alternative funding sources Develop a strong contingency funding

plan

If ldquotighterrdquo liquid assets then consider

Define liquid asset cushion May have to be more offensive in

deposit pricing strategies Maximize alternative funding sources Defend with ldquototalrdquo liquidity (next slide)

Strategy Considerations

copy 2020 Darling Consulting Group Inc Page 15

FOCUSING ON TOTAL LIQUIDITY

copy 2020 Darling Consulting Group Inc Page 16

Total Liquidity FocusBasic Surplus Total Liquidity

Reserve based on funding concentrations

Available borrowing capacity vs wholesale reliance

Non-Member CD capacity

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB

Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)Current Brokered Deposit Balances

REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS

BASIC SURPLUS W FHLB amp BROKERED DEPOSITS

10 30000

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 250030 2500

III QUALIFYING FHLB LOAN COLLATERAL

175000125000

35000

37750 76

112750 226

IV BROKERED DEPOSIT ACCESS

12500050000

75000

500000

50000

162750 326

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 17

Strategy Shift CashInvestments into Loans

Shifting cash into loans will reduce liquid assets but can increase spread by +2-3 with a minimal impact to total liquidity

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB 103500 207

14450050000

94500

III QUALIFYING FHLB LOAN COLLATERAL

175000144500

35000

9000 18

30 250010 30000

88

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 2500

0

Pct Of Assets15000

44000

0

10000 19000 0

29000

0 0 00 0 00 0 0

0 0 00 0 0

0 0 0

10000 20000 0

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

I LIQUID ASSETS

0500000

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 18

NII Impact on Holding Mortgages

Year Base Δ NII

1 $1459

2 $1773

Total $3232

50 Increase in NII over 3 Years

March 2019 March 2016

Page 19copy 2019 Darling Consulting Group Inc

Policy Discussion

Discuss if certain policies are needed such as Cash + ST InvestmentsAssets LoansShares

Discuss Policy Guidelines Liquid Assets Total Liquidity

Discuss Wholesale Funding comfort levels FHLB Non-Member Deposits Total Wholesale

Page 20copy 2019 Darling Consulting Group Inc

DCG Contingency Funding PlanhellipWhatrsquos IncludedCFP Table of Contents

copy 2020 Darling Consulting Group Inc Page 21

DEVELOPING A DYNAMIC FORECASTamp STRESS TEST FRAMEWORK

copy 2020 Darling Consulting Group Inc Page 22

Dynamic Liquidity Forecast

Source Liquidity360degreg

$140MM Loan Growth$70MM Deposit Growth$70MM Borrowings

copy 2020 Darling Consulting Group Inc Page 23

Total Liquidity vs Call Report Ratios

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													0																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													44000								88
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			9000							18
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												144500
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												144500
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													94500
																																			BASIC SURPLUS W FHLB			103500							207
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			153500							307

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													30000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													74000								148
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			39000							78
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			114000							228
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			164000							328

copy 2020 Darling Consulting Group Inc Page 11

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

I LIQUID ASSETS

30000500000

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

0 0 0

10000 20000 0

0 0 0

0 0 00 0 0

0 0 00 0 0

0

10000 19000 0

29000

0

Pct Of Assets15000

74000 148

Redefining Liquid AssetsBasic Surplus Liquid Assets

Cash + ST InvestmentsAssetsShortfalls

Forces to hold more cash Could increase IRR exposure to

falling rates Focuses more on cash flow vs

collateral (needing to wait for cash to come due)

Ultimately can hurt NII

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 12

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

I LIQUID ASSETS

10000500000

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

0 0 0

10000 45000 0

0 0 0

0 0 00 0 0

0 0 00 0 0

0

10000 42750 0

52750

0

Pct Of Assets10000

72750 146

Redefining Liquid Assets

Collateral-Based Approach Focuses on ability to access cash

quickly Optimizes liquidity yield

What is a comfortable level for our CU

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 13

NII Impact on Cash Extension

Add 100bps of spread Protect against falling rates Maintain relative sensitivity to rising rates Neutral liquid asset shift

copy 2020 Darling Consulting Group Inc Page 14

If ldquostrongerrdquo liquid assets then consider

Keep cash to work Identify ability to shift liquidity into

loans Consider more of a defensive deposit

strategy Maximize alternative funding sources Develop a strong contingency funding

plan

If ldquotighterrdquo liquid assets then consider

Define liquid asset cushion May have to be more offensive in

deposit pricing strategies Maximize alternative funding sources Defend with ldquototalrdquo liquidity (next slide)

Strategy Considerations

copy 2020 Darling Consulting Group Inc Page 15

FOCUSING ON TOTAL LIQUIDITY

copy 2020 Darling Consulting Group Inc Page 16

Total Liquidity FocusBasic Surplus Total Liquidity

Reserve based on funding concentrations

Available borrowing capacity vs wholesale reliance

Non-Member CD capacity

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB

Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)Current Brokered Deposit Balances

REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS

BASIC SURPLUS W FHLB amp BROKERED DEPOSITS

10 30000

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 250030 2500

III QUALIFYING FHLB LOAN COLLATERAL

175000125000

35000

37750 76

112750 226

IV BROKERED DEPOSIT ACCESS

12500050000

75000

500000

50000

162750 326

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 17

Strategy Shift CashInvestments into Loans

Shifting cash into loans will reduce liquid assets but can increase spread by +2-3 with a minimal impact to total liquidity

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB 103500 207

14450050000

94500

III QUALIFYING FHLB LOAN COLLATERAL

175000144500

35000

9000 18

30 250010 30000

88

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 2500

0

Pct Of Assets15000

44000

0

10000 19000 0

29000

0 0 00 0 00 0 0

0 0 00 0 0

0 0 0

10000 20000 0

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

I LIQUID ASSETS

0500000

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 18

NII Impact on Holding Mortgages

Year Base Δ NII

1 $1459

2 $1773

Total $3232

50 Increase in NII over 3 Years

March 2019 March 2016

Page 19copy 2019 Darling Consulting Group Inc

Policy Discussion

Discuss if certain policies are needed such as Cash + ST InvestmentsAssets LoansShares

Discuss Policy Guidelines Liquid Assets Total Liquidity

Discuss Wholesale Funding comfort levels FHLB Non-Member Deposits Total Wholesale

Page 20copy 2019 Darling Consulting Group Inc

DCG Contingency Funding PlanhellipWhatrsquos IncludedCFP Table of Contents

copy 2020 Darling Consulting Group Inc Page 21

DEVELOPING A DYNAMIC FORECASTamp STRESS TEST FRAMEWORK

copy 2020 Darling Consulting Group Inc Page 22

Dynamic Liquidity Forecast

Source Liquidity360degreg

$140MM Loan Growth$70MM Deposit Growth$70MM Borrowings

copy 2020 Darling Consulting Group Inc Page 23

Total Liquidity vs Call Report Ratios

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													0																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													44000								88
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			9000							18
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												144500
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												144500
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													94500
																																			BASIC SURPLUS W FHLB			103500							207
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			153500							307

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													30000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													74000								148
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			39000							78
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			114000							228
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			164000							328

copy 2020 Darling Consulting Group Inc Page 12

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

I LIQUID ASSETS

10000500000

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

0 0 0

10000 45000 0

0 0 0

0 0 00 0 0

0 0 00 0 0

0

10000 42750 0

52750

0

Pct Of Assets10000

72750 146

Redefining Liquid Assets

Collateral-Based Approach Focuses on ability to access cash

quickly Optimizes liquidity yield

What is a comfortable level for our CU

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 13

NII Impact on Cash Extension

Add 100bps of spread Protect against falling rates Maintain relative sensitivity to rising rates Neutral liquid asset shift

copy 2020 Darling Consulting Group Inc Page 14

If ldquostrongerrdquo liquid assets then consider

Keep cash to work Identify ability to shift liquidity into

loans Consider more of a defensive deposit

strategy Maximize alternative funding sources Develop a strong contingency funding

plan

If ldquotighterrdquo liquid assets then consider

Define liquid asset cushion May have to be more offensive in

deposit pricing strategies Maximize alternative funding sources Defend with ldquototalrdquo liquidity (next slide)

Strategy Considerations

copy 2020 Darling Consulting Group Inc Page 15

FOCUSING ON TOTAL LIQUIDITY

copy 2020 Darling Consulting Group Inc Page 16

Total Liquidity FocusBasic Surplus Total Liquidity

Reserve based on funding concentrations

Available borrowing capacity vs wholesale reliance

Non-Member CD capacity

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB

Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)Current Brokered Deposit Balances

REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS

BASIC SURPLUS W FHLB amp BROKERED DEPOSITS

10 30000

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 250030 2500

III QUALIFYING FHLB LOAN COLLATERAL

175000125000

35000

37750 76

112750 226

IV BROKERED DEPOSIT ACCESS

12500050000

75000

500000

50000

162750 326

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 17

Strategy Shift CashInvestments into Loans

Shifting cash into loans will reduce liquid assets but can increase spread by +2-3 with a minimal impact to total liquidity

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB 103500 207

14450050000

94500

III QUALIFYING FHLB LOAN COLLATERAL

175000144500

35000

9000 18

30 250010 30000

88

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 2500

0

Pct Of Assets15000

44000

0

10000 19000 0

29000

0 0 00 0 00 0 0

0 0 00 0 0

0 0 0

10000 20000 0

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

I LIQUID ASSETS

0500000

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 18

NII Impact on Holding Mortgages

Year Base Δ NII

1 $1459

2 $1773

Total $3232

50 Increase in NII over 3 Years

March 2019 March 2016

Page 19copy 2019 Darling Consulting Group Inc

Policy Discussion

Discuss if certain policies are needed such as Cash + ST InvestmentsAssets LoansShares

Discuss Policy Guidelines Liquid Assets Total Liquidity

Discuss Wholesale Funding comfort levels FHLB Non-Member Deposits Total Wholesale

Page 20copy 2019 Darling Consulting Group Inc

DCG Contingency Funding PlanhellipWhatrsquos IncludedCFP Table of Contents

copy 2020 Darling Consulting Group Inc Page 21

DEVELOPING A DYNAMIC FORECASTamp STRESS TEST FRAMEWORK

copy 2020 Darling Consulting Group Inc Page 22

Dynamic Liquidity Forecast

Source Liquidity360degreg

$140MM Loan Growth$70MM Deposit Growth$70MM Borrowings

copy 2020 Darling Consulting Group Inc Page 23

Total Liquidity vs Call Report Ratios

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													0																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													44000								88
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			9000							18
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												144500
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												144500
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													94500
																																			BASIC SURPLUS W FHLB			103500							207
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			153500							307

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

copy 2020 Darling Consulting Group Inc Page 13

NII Impact on Cash Extension

Add 100bps of spread Protect against falling rates Maintain relative sensitivity to rising rates Neutral liquid asset shift

copy 2020 Darling Consulting Group Inc Page 14

If ldquostrongerrdquo liquid assets then consider

Keep cash to work Identify ability to shift liquidity into

loans Consider more of a defensive deposit

strategy Maximize alternative funding sources Develop a strong contingency funding

plan

If ldquotighterrdquo liquid assets then consider

Define liquid asset cushion May have to be more offensive in

deposit pricing strategies Maximize alternative funding sources Defend with ldquototalrdquo liquidity (next slide)

Strategy Considerations

copy 2020 Darling Consulting Group Inc Page 15

FOCUSING ON TOTAL LIQUIDITY

copy 2020 Darling Consulting Group Inc Page 16

Total Liquidity FocusBasic Surplus Total Liquidity

Reserve based on funding concentrations

Available borrowing capacity vs wholesale reliance

Non-Member CD capacity

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB

Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)Current Brokered Deposit Balances

REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS

BASIC SURPLUS W FHLB amp BROKERED DEPOSITS

10 30000

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 250030 2500

III QUALIFYING FHLB LOAN COLLATERAL

175000125000

35000

37750 76

112750 226

IV BROKERED DEPOSIT ACCESS

12500050000

75000

500000

50000

162750 326

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 17

Strategy Shift CashInvestments into Loans

Shifting cash into loans will reduce liquid assets but can increase spread by +2-3 with a minimal impact to total liquidity

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB 103500 207

14450050000

94500

III QUALIFYING FHLB LOAN COLLATERAL

175000144500

35000

9000 18

30 250010 30000

88

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 2500

0

Pct Of Assets15000

44000

0

10000 19000 0

29000

0 0 00 0 00 0 0

0 0 00 0 0

0 0 0

10000 20000 0

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

I LIQUID ASSETS

0500000

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 18

NII Impact on Holding Mortgages

Year Base Δ NII

1 $1459

2 $1773

Total $3232

50 Increase in NII over 3 Years

March 2019 March 2016

Page 19copy 2019 Darling Consulting Group Inc

Policy Discussion

Discuss if certain policies are needed such as Cash + ST InvestmentsAssets LoansShares

Discuss Policy Guidelines Liquid Assets Total Liquidity

Discuss Wholesale Funding comfort levels FHLB Non-Member Deposits Total Wholesale

Page 20copy 2019 Darling Consulting Group Inc

DCG Contingency Funding PlanhellipWhatrsquos IncludedCFP Table of Contents

copy 2020 Darling Consulting Group Inc Page 21

DEVELOPING A DYNAMIC FORECASTamp STRESS TEST FRAMEWORK

copy 2020 Darling Consulting Group Inc Page 22

Dynamic Liquidity Forecast

Source Liquidity360degreg

$140MM Loan Growth$70MM Deposit Growth$70MM Borrowings

copy 2020 Darling Consulting Group Inc Page 23

Total Liquidity vs Call Report Ratios

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													0																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													44000								88
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			9000							18
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												144500
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												144500
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													94500
																																			BASIC SURPLUS W FHLB			103500							207
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			153500							307

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

copy 2020 Darling Consulting Group Inc Page 14

If ldquostrongerrdquo liquid assets then consider

Keep cash to work Identify ability to shift liquidity into

loans Consider more of a defensive deposit

strategy Maximize alternative funding sources Develop a strong contingency funding

plan

If ldquotighterrdquo liquid assets then consider

Define liquid asset cushion May have to be more offensive in

deposit pricing strategies Maximize alternative funding sources Defend with ldquototalrdquo liquidity (next slide)

Strategy Considerations

copy 2020 Darling Consulting Group Inc Page 15

FOCUSING ON TOTAL LIQUIDITY

copy 2020 Darling Consulting Group Inc Page 16

Total Liquidity FocusBasic Surplus Total Liquidity

Reserve based on funding concentrations

Available borrowing capacity vs wholesale reliance

Non-Member CD capacity

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB

Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)Current Brokered Deposit Balances

REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS

BASIC SURPLUS W FHLB amp BROKERED DEPOSITS

10 30000

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 250030 2500

III QUALIFYING FHLB LOAN COLLATERAL

175000125000

35000

37750 76

112750 226

IV BROKERED DEPOSIT ACCESS

12500050000

75000

500000

50000

162750 326

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 17

Strategy Shift CashInvestments into Loans

Shifting cash into loans will reduce liquid assets but can increase spread by +2-3 with a minimal impact to total liquidity

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB 103500 207

14450050000

94500

III QUALIFYING FHLB LOAN COLLATERAL

175000144500

35000

9000 18

30 250010 30000

88

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 2500

0

Pct Of Assets15000

44000

0

10000 19000 0

29000

0 0 00 0 00 0 0

0 0 00 0 0

0 0 0

10000 20000 0

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

I LIQUID ASSETS

0500000

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 18

NII Impact on Holding Mortgages

Year Base Δ NII

1 $1459

2 $1773

Total $3232

50 Increase in NII over 3 Years

March 2019 March 2016

Page 19copy 2019 Darling Consulting Group Inc

Policy Discussion

Discuss if certain policies are needed such as Cash + ST InvestmentsAssets LoansShares

Discuss Policy Guidelines Liquid Assets Total Liquidity

Discuss Wholesale Funding comfort levels FHLB Non-Member Deposits Total Wholesale

Page 20copy 2019 Darling Consulting Group Inc

DCG Contingency Funding PlanhellipWhatrsquos IncludedCFP Table of Contents

copy 2020 Darling Consulting Group Inc Page 21

DEVELOPING A DYNAMIC FORECASTamp STRESS TEST FRAMEWORK

copy 2020 Darling Consulting Group Inc Page 22

Dynamic Liquidity Forecast

Source Liquidity360degreg

$140MM Loan Growth$70MM Deposit Growth$70MM Borrowings

copy 2020 Darling Consulting Group Inc Page 23

Total Liquidity vs Call Report Ratios

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													0																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													44000								88
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			9000							18
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												144500
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												144500
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													94500
																																			BASIC SURPLUS W FHLB			103500							207
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			153500							307

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

copy 2020 Darling Consulting Group Inc Page 15

FOCUSING ON TOTAL LIQUIDITY

copy 2020 Darling Consulting Group Inc Page 16

Total Liquidity FocusBasic Surplus Total Liquidity

Reserve based on funding concentrations

Available borrowing capacity vs wholesale reliance

Non-Member CD capacity

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB

Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)Current Brokered Deposit Balances

REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS

BASIC SURPLUS W FHLB amp BROKERED DEPOSITS

10 30000

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 250030 2500

III QUALIFYING FHLB LOAN COLLATERAL

175000125000

35000

37750 76

112750 226

IV BROKERED DEPOSIT ACCESS

12500050000

75000

500000

50000

162750 326

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 17

Strategy Shift CashInvestments into Loans

Shifting cash into loans will reduce liquid assets but can increase spread by +2-3 with a minimal impact to total liquidity

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB 103500 207

14450050000

94500

III QUALIFYING FHLB LOAN COLLATERAL

175000144500

35000

9000 18

30 250010 30000

88

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 2500

0

Pct Of Assets15000

44000

0

10000 19000 0

29000

0 0 00 0 00 0 0

0 0 00 0 0

0 0 0

10000 20000 0

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

I LIQUID ASSETS

0500000

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 18

NII Impact on Holding Mortgages

Year Base Δ NII

1 $1459

2 $1773

Total $3232

50 Increase in NII over 3 Years

March 2019 March 2016

Page 19copy 2019 Darling Consulting Group Inc

Policy Discussion

Discuss if certain policies are needed such as Cash + ST InvestmentsAssets LoansShares

Discuss Policy Guidelines Liquid Assets Total Liquidity

Discuss Wholesale Funding comfort levels FHLB Non-Member Deposits Total Wholesale

Page 20copy 2019 Darling Consulting Group Inc

DCG Contingency Funding PlanhellipWhatrsquos IncludedCFP Table of Contents

copy 2020 Darling Consulting Group Inc Page 21

DEVELOPING A DYNAMIC FORECASTamp STRESS TEST FRAMEWORK

copy 2020 Darling Consulting Group Inc Page 22

Dynamic Liquidity Forecast

Source Liquidity360degreg

$140MM Loan Growth$70MM Deposit Growth$70MM Borrowings

copy 2020 Darling Consulting Group Inc Page 23

Total Liquidity vs Call Report Ratios

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													0																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													44000								88
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			9000							18
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												144500
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												144500
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													94500
																																			BASIC SURPLUS W FHLB			103500							207
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			153500							307

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

copy 2020 Darling Consulting Group Inc Page 16

Total Liquidity FocusBasic Surplus Total Liquidity

Reserve based on funding concentrations

Available borrowing capacity vs wholesale reliance

Non-Member CD capacity

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB

Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)Current Brokered Deposit Balances

REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS

BASIC SURPLUS W FHLB amp BROKERED DEPOSITS

10 30000

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 250030 2500

III QUALIFYING FHLB LOAN COLLATERAL

175000125000

35000

37750 76

112750 226

IV BROKERED DEPOSIT ACCESS

12500050000

75000

500000

50000

162750 326

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 17

Strategy Shift CashInvestments into Loans

Shifting cash into loans will reduce liquid assets but can increase spread by +2-3 with a minimal impact to total liquidity

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB 103500 207

14450050000

94500

III QUALIFYING FHLB LOAN COLLATERAL

175000144500

35000

9000 18

30 250010 30000

88

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 2500

0

Pct Of Assets15000

44000

0

10000 19000 0

29000

0 0 00 0 00 0 0

0 0 00 0 0

0 0 0

10000 20000 0

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

I LIQUID ASSETS

0500000

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 18

NII Impact on Holding Mortgages

Year Base Δ NII

1 $1459

2 $1773

Total $3232

50 Increase in NII over 3 Years

March 2019 March 2016

Page 19copy 2019 Darling Consulting Group Inc

Policy Discussion

Discuss if certain policies are needed such as Cash + ST InvestmentsAssets LoansShares

Discuss Policy Guidelines Liquid Assets Total Liquidity

Discuss Wholesale Funding comfort levels FHLB Non-Member Deposits Total Wholesale

Page 20copy 2019 Darling Consulting Group Inc

DCG Contingency Funding PlanhellipWhatrsquos IncludedCFP Table of Contents

copy 2020 Darling Consulting Group Inc Page 21

DEVELOPING A DYNAMIC FORECASTamp STRESS TEST FRAMEWORK

copy 2020 Darling Consulting Group Inc Page 22

Dynamic Liquidity Forecast

Source Liquidity360degreg

$140MM Loan Growth$70MM Deposit Growth$70MM Borrowings

copy 2020 Darling Consulting Group Inc Page 23

Total Liquidity vs Call Report Ratios

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													0																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													44000								88
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			9000							18
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												144500
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												144500
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													94500
																																			BASIC SURPLUS W FHLB			103500							207
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			153500							307

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													10000																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							45000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							42750							0																														Total									0							0						0
			Total Unpledged Securities																													52750																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													10000
390000
			TOTAL LIQUID ASSETS																													72750								146
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			37750							76
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												125000
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												125000
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													75000
																																			BASIC SURPLUS W FHLB			112750							226
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			162750							326

copy 2020 Darling Consulting Group Inc Page 17

Strategy Shift CashInvestments into Loans

Shifting cash into loans will reduce liquid assets but can increase spread by +2-3 with a minimal impact to total liquidity

TOTAL ASSETS =Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)

Security Collateral

Total Market Value of SecuritiesLess Securities Pledged to

FHLBFed DiscountOther Secured

Wholesale ReposRetail ReposSweeps

Municipal DepositsOther

Available Unencumbered Security Collateral

Total Unpledged Securities

Over Collateralized Securities Pledging Position

Cash flow (lt 30 Days) from Securities not listed above

Investment CDs

TOTAL LIQUID ASSETS

Maturing Unsecured Liabilities (lt 30 Days)

Deposit Coveragesof CDs Maturing lt 30 Daysof Jumbo CDs Maturing lt 30 Daysof Other Deposits

TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

BASIC SURPLUS

A Maximum Borrowing Line at FHLB B Qualifying Loan Collateral at the FHLB (net of haircut)C Excess Loan Collateral (if A lt B)

Maximum Borrowing Capacity (Lesser of A or B)Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit

REMAINING FHLB LOAN BASED BORROWING CAPACITY

BASIC SURPLUS W FHLB 103500 207

14450050000

94500

III QUALIFYING FHLB LOAN COLLATERAL

175000144500

35000

9000 18

30 250010 30000

88

II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES

0

25 2500

0

Pct Of Assets15000

44000

0

10000 19000 0

29000

0 0 00 0 00 0 0

0 0 00 0 0

0 0 0

10000 20000 0

MunisCollateral Value 100 95 90

UST amp Agency MBS CMOsAgency Backed

I LIQUID ASSETS

0500000

Basic Surplus

copy 2020 Darling Consulting Group Inc Page 18

NII Impact on Holding Mortgages

Year Base Δ NII

1 $1459

2 $1773

Total $3232

50 Increase in NII over 3 Years

March 2019 March 2016

Page 19copy 2019 Darling Consulting Group Inc

Policy Discussion

Discuss if certain policies are needed such as Cash + ST InvestmentsAssets LoansShares

Discuss Policy Guidelines Liquid Assets Total Liquidity

Discuss Wholesale Funding comfort levels FHLB Non-Member Deposits Total Wholesale

Page 20copy 2019 Darling Consulting Group Inc

DCG Contingency Funding PlanhellipWhatrsquos IncludedCFP Table of Contents

copy 2020 Darling Consulting Group Inc Page 21

DEVELOPING A DYNAMIC FORECASTamp STRESS TEST FRAMEWORK

copy 2020 Darling Consulting Group Inc Page 22

Dynamic Liquidity Forecast

Source Liquidity360degreg

$140MM Loan Growth$70MM Deposit Growth$70MM Borrowings

copy 2020 Darling Consulting Group Inc Page 23

Total Liquidity vs Call Report Ratios

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

			I LIQUID ASSETS																																																									OTHER LIQUIDITY ITEMS
			TOTAL ASSETS =									500000																																																								Mkt Value								Pledged						Available
			Overnight Funds Sold amp Short-Term Investments (avg balance if wide daily fluctuations)																													0																													Corporate Securities									0							0						0
																																																											Municipal Securities									27876							0						0
																		UST amp Agency							MBS CMOs																																				Equity Securities									0							0						0
			Security Collateral																						Agency Backed							Munis																														Other									0							0						0
											Collateral Value									100							95							90
				Total Market Value of Securities															10000							20000							0																														UNSECURED BORROWING LINES
				Less Securities Pledged to																																																																Line					Outstanding								Available
															FHLB					0							0							0																													Fed Funds Lines									0							0						0
															Fed DiscountOther Secured					0							0							0
															Wholesale Repos					0							0							0																													SECURED BORROWING LINES
															Retail ReposSweeps					0							0							0																																					Line					Outstanding								Available
															Municipal Deposits					0							0							0																													Fed BIC Lines									0							0						0
															Other					0							0							0																													Fed DiscountOther									0							0						0
			Available Unencumbered Security Collateral																10000							19000							0																														Total									0							0						0
			Total Unpledged Securities																													29000																																																	of Assets
																																																											BASIC SURPLUS - EXCL FED BIC amp OTHER SECURED LINES
			Over Collateralized Securities Pledging Position																													0																																																	of Assets
																																																											No Change to Basic Surplus																NA						NA
			Cash flow (lt 30 Days) from Securities not listed above																													0
																																						Pct Of Assets																						No Change to Basic Surplus																NA						NA
156000				Investment CDs																													15000
390000
			TOTAL LIQUID ASSETS																													44000								88
450000
315000				II SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																																																									AVAILABLE BORROWING CAPACITY (PER POLICY)
00777777778
			Maturing Unsecured Liabilities (lt 30 Days)																													0
			Deposit Coverages																																																									Current Outstanding Borrowings (Exc SweepsRet Repos)																				0
			25			of CDs Maturing lt 30 Days																											2500
			30			of Jumbo CDs Maturing lt 30 Days																											2500																		Policy Limits (Min)												Maximum Borrowing Capacity is Not Available
			10			of Other Deposits																											30000
																																															Well Capitalized						lt Well Capitalized
																																																											OTHER NOTES
			TOTAL SHORT TERM POTENTIALLY VOLATILE LIABILITIES amp COVERAGES																													35000
																																			BASIC SURPLUS			9000							18
			III QUALIFYING FHLB LOAN COLLATERAL
			A		Maximum Borrowing Line at FHLB																												175000
			B		Qualifying Loan Collateral at the FHLB (net of haircut)																												144500
			C		Excess Loan Collateral (if A lt B)
				Maximum Borrowing Capacity (Lesser of A or B)																												144500
				Collateral Currently Encumbered by Outstanding AdvancesLetters of Credit																												50000
			REMAINING FHLB LOAN BASED BORROWING CAPACITY																													94500
																																			BASIC SURPLUS W FHLB			103500							207
			IV BROKERED DEPOSIT ACCESS
			Maximum Board Authorized Brokered Deposit Capacity (10 of Total Assets)																													50000
			Current Brokered Deposit Balances																													0
			REMAINING CAPACITY TO UTILIZE BROKERED DEPOSITS																													50000
																																			BASIC SURPLUS W FHLB amp BROKERED DEPOSITS			153500							307

copy 2020 Darling Consulting Group Inc Page 18

NII Impact on Holding Mortgages

Year Base Δ NII

1 $1459

2 $1773

Total $3232

50 Increase in NII over 3 Years

March 2019 March 2016

Page 19copy 2019 Darling Consulting Group Inc

Policy Discussion

Discuss if certain policies are needed such as Cash + ST InvestmentsAssets LoansShares

Discuss Policy Guidelines Liquid Assets Total Liquidity

Discuss Wholesale Funding comfort levels FHLB Non-Member Deposits Total Wholesale

Page 20copy 2019 Darling Consulting Group Inc

DCG Contingency Funding PlanhellipWhatrsquos IncludedCFP Table of Contents

copy 2020 Darling Consulting Group Inc Page 21

DEVELOPING A DYNAMIC FORECASTamp STRESS TEST FRAMEWORK

copy 2020 Darling Consulting Group Inc Page 22

Dynamic Liquidity Forecast

Source Liquidity360degreg

$140MM Loan Growth$70MM Deposit Growth$70MM Borrowings

copy 2020 Darling Consulting Group Inc Page 23

Total Liquidity vs Call Report Ratios

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

Page 19copy 2019 Darling Consulting Group Inc

Policy Discussion

Discuss if certain policies are needed such as Cash + ST InvestmentsAssets LoansShares

Discuss Policy Guidelines Liquid Assets Total Liquidity

Discuss Wholesale Funding comfort levels FHLB Non-Member Deposits Total Wholesale

Page 20copy 2019 Darling Consulting Group Inc

DCG Contingency Funding PlanhellipWhatrsquos IncludedCFP Table of Contents

copy 2020 Darling Consulting Group Inc Page 21

DEVELOPING A DYNAMIC FORECASTamp STRESS TEST FRAMEWORK

copy 2020 Darling Consulting Group Inc Page 22

Dynamic Liquidity Forecast

Source Liquidity360degreg

$140MM Loan Growth$70MM Deposit Growth$70MM Borrowings

copy 2020 Darling Consulting Group Inc Page 23

Total Liquidity vs Call Report Ratios

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

Page 20copy 2019 Darling Consulting Group Inc

DCG Contingency Funding PlanhellipWhatrsquos IncludedCFP Table of Contents

copy 2020 Darling Consulting Group Inc Page 21

DEVELOPING A DYNAMIC FORECASTamp STRESS TEST FRAMEWORK

copy 2020 Darling Consulting Group Inc Page 22

Dynamic Liquidity Forecast

Source Liquidity360degreg

$140MM Loan Growth$70MM Deposit Growth$70MM Borrowings

copy 2020 Darling Consulting Group Inc Page 23

Total Liquidity vs Call Report Ratios

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

copy 2020 Darling Consulting Group Inc Page 21

DEVELOPING A DYNAMIC FORECASTamp STRESS TEST FRAMEWORK

copy 2020 Darling Consulting Group Inc Page 22

Dynamic Liquidity Forecast

Source Liquidity360degreg

$140MM Loan Growth$70MM Deposit Growth$70MM Borrowings

copy 2020 Darling Consulting Group Inc Page 23

Total Liquidity vs Call Report Ratios

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

copy 2020 Darling Consulting Group Inc Page 22

Dynamic Liquidity Forecast

Source Liquidity360degreg

$140MM Loan Growth$70MM Deposit Growth$70MM Borrowings

copy 2020 Darling Consulting Group Inc Page 23

Total Liquidity vs Call Report Ratios

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

copy 2020 Darling Consulting Group Inc Page 23

Total Liquidity vs Call Report Ratios

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

Page 24copy 2019 Darling Consulting Group Inc

Liquidity Stress Testing

Avoid these common missteps Point-in-time impact vs projected impact Conflicting assumptions (eg 10 loan growth in doomsday scenario) Lack of ldquoBelow Well-Capitalizedrdquo scenario Lack of documentation and assumptions support

Must haves Balanced mix of macro-level and credit union-specific scenarios Testing on credit union-specific risks (eg funding concentrations) Other Draws on LOCs deposit runoff funding line adjustments etc

Bonus points Relief scenarios separate from stress scenarios Data-defended assumptions (eg deposit runoff) Detailed assumptions report with resultsconclusions

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

copy 2020 Darling Consulting Group Inc Page 25

Liquidity Stress Testing amp Key ComponentsModerate Stress Scenario

Deposit runoff (from study)Increased haircuts (last crisis)

Remove unsecured funding lines How long until we feel the pressure

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

copy 2020 Darling Consulting Group Inc Page 26

Worst Case Scenario amp Remediation PlanSevere Stress Scenario

Severe Stress Scenario Remediation Plan

Source Liquidity360degreg

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

Page 27copy 2019 Darling Consulting Group Inc

Assumptions Documentation Example

Below Regulatory Well-Capitalized Stress Scenario Financial deterioration such that Credit Union falls below well capitalized or comes under a Regulatory Directive that includes loss of access to Non-Member Deposits and FHLB Funding Line is severely lowered Assumptions for Stress variables Deposit runoff Increased haircuts on collateral Disruption of loan cash flow from non-performing loans Prohibited use of Non-Member Deposits (new and rollovers) Access to any available Fed Funds Lines is eliminated

The results of the cash flow forecast and corresponding funds availability analysis reflect the following Funds Availability remains positive through XX months and goes negative by XX Coverage for

$XXMM of deposit outflows (inclusive of brokered) over a two-year period is stressed Also a $XXMM reduction in borrowing capacity due to increased collateral haircuts (loans and securities) has been applied

Please see CFP for corrective action game plan

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

copy 2020 Darling Consulting Group Inc Page 28

REVITALIZE YOUR RISK MONITOR

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

copy 2020 Darling Consulting Group Inc Page 29

Liquidity Risk Monitor

Source Liquidity360degreg

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

copy 2020 Darling Consulting Group Inc Page 30

Management Response

Liquid AssetsAssets is 75 and has triggered Risk Level 1

Management has applied a low stress level response as the total liquidity position and access to liquidity is strong Additionally credit quality levels and trends remain strong

Management will closely monitor changes to liquidity levels moving forward

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

copy 2020 Darling Consulting Group Inc Page 31

Todayrsquos Takeaways

Focus on Total Liquidityhellipnot just cash and short-term investments

Identify your liquid asset ldquocushionrdquo

Dynamic Forecasting amp Stress Testinghellipdonrsquot take any shortcuts

Establish your Risk Monitorhellipdesign Early Warning Indicators and

trigger levels that fit your profile

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You

copy 2020 Darling Consulting Group Inc Page 32

Thank You

Joe KennersonManaging DirectorDarling Consulting Group978-463-0400 x150jkennersondarlingconsultingcom

Mark HaberlandManaging DirectorDarling Consulting Group978-463-0400 x152mhaberlanddarlingconsultingcom

DCGrsquos Total Liquidity Solution Turnkey outsourced liquidity model Dynamic forecasting with CU-specific cash flows Forward-looking liquidity projections What-if stress testing with customizable scenarios

and assumptions Relief scenarios to put your game plan into place Robust risk monitoring system with early warning

triggers Written Contingency Funding Plan Executive-level reports

• A Proactive Approach to Liquidity Management
• Todayrsquos Focus
• Industry Trends
• Regulatory Radar
• Regulatory Radar
• ESTABLISHING A TOTAL LIQUIDITY SOLUTION
• ldquoTraditionalrdquo Measures
• Total Liquidity Solution
• Liquidity Management Impact
• Redefining liquid assets
• Redefining Liquid Assets
• Redefining Liquid Assets
• NII Impact on Cash Extension
• Strategy Considerations
• FOCUSING ON TOTAL LIQUIDITY
• Total Liquidity Focus
• Strategy Shift CashInvestments into Loans
• NII Impact on Holding Mortgages
• Policy Discussion
• DCG Contingency Funding PlanhellipWhatrsquos Included
• Developing a dynamic forecastamp stress test framework
• Dynamic Liquidity Forecast
• Total Liquidity vs Call Report Ratios
• Liquidity Stress Testing
• Liquidity Stress Testing amp Key Components
• Worst Case Scenario amp Remediation Plan
• Assumptions Documentation Example
• Revitalize your risk monitor
• Liquidity Risk Monitor
• Management Response
• Todayrsquos Takeaways
• Thank You