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Presents. MANAGING LIQUIDITY, CAPITAL PROFILES AND OTHER CRITICAL ISSUES STEVEN HOULE, CFA DIRECTOR, ADVISORY SERVICES. Presentation Overview. Topics of Discussion. Funding Trends and Analysis Funding Management Strategies Liquidity Risk Management Capital Trends and Management Strategies.

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Presents

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  1. Presents MANAGING LIQUIDITY, CAPITAL PROFILES AND OTHER CRITICAL ISSUES STEVEN HOULE, CFA DIRECTOR, ADVISORY SERVICES

  2. Presentation Overview Topics of Discussion Funding Trends and Analysis Funding Management Strategies Liquidity Risk Management Capital Trends and Management Strategies

  3. Source: NCUA Billions Shares and Deposit Trends The Majority Of Share Growth Has Been Non-term Shares

  4. Source: NCUA Shares and Deposit Trends Non-term Share Allocations Continue To Increase

  5. Cost of Funds Trends Cost of Funds Continues To Decline With Reallocations Source: NCUA

  6. Gross Spreads Trends Declining COF Has Off-Set Declining Asset Yield Source: NCUA

  7. Deposit Rates and Alternative Costs Credit Union Deposit Rate And Alternative Borrowings Costs October 2011 Credit Unions FHLB Borrowings Treasury Rates Non-term Shares Share Drafts 0.12% 0.16% Regular Shares 0.20 0.16 Money Market 0.24 0.16 Term Certificates 3 Month 0.23% 0.35% 0.09% 6 Month 0.37 0.45 0.14 1 Year 0.48 0.72 0.18 2 Year 0.73 0.84 0.26 3 Year 0.98 1.05 0.35 Source: NAFCU, Data Trac Corp & FHLB

  8. Funding Management Strategies Strategic Considerations Financial Profile #1 Assets Loan Growth +1% VE & RE Growth +2% / +1% Loans-to-Assets 56% RE-to-Assets 10% Shares Growth +10% Non-term / Term +8% / +12% Allocations Non-term 56% Term 44% Earnings Cost of Funds Flat Gross Spread Declining

  9. Funding Management Strategies Strategic Considerations Financial Profile #2 Assets Loan Growth +2% VE & RE Growth -17% / +7% Loans-to-Assets 65% RE-to-Assets 33% Shares Growth +8% Non-term / Term +22% / -14% Allocations Non-term 61% Term 39% Term Borrowings (% of shares) 8% Earnings Cost of Funds Declining Gross Spread Flat

  10. Funding Management Strategies Strategic Considerations Financial Profile #3 Assets Loan Growth +8% VE & RE Growth +22% / -5% Loans-to-Assets 30% RE-to-Assets 6% Shares Growth +17% Non-term / Term +23% /+5% Allocations Non-term 65% Term 35% Earnings Cost of Funds Declining Gross Spread Slightly Increasing

  11. Liquidity Risk Management

  12. Oversight, Policies and Procedures

  13. Measuring and Monitoring Short-term Liquidity Management – Intraday Balances

  14. Measuring and Monitoring Net Operating Cash Flow Analysis Millions • Identifies the net change in loans and shares over a defined period • Valuable for tracking changes in loans and shares and cyclical cash flow trends

  15. Measuring and Monitoring Forecasting Your Liquidity Ratio Under Various Scenarios +8% -5% Base +100 bps -100 bps Loan Growth Share Growth Investments > 6 mos$ 15,250 $ 15,250 $ 10,250 $ 15,250 $ 15,250 Loans 130,500 130,500 130,500 140,940 130,500 Other Assets 10,950 10,950 10,950 10,950 10,950 Total Uses $156,750 $156,700 $151,700 $167,140 $156,700 Shares and Deposits $185,250 $185,250 $185,250 $185,250 $185,250 Equity 16,750 16,750 16,969 16,750 16,750 Total Sources $202,000 $202,000 $202,000 $202,000 $192,737 Liquidity Ratio (<95%)77.6% 77.6% 75.1% 82.7% 81.3% (Millions)

  16. Diversified Funding Mix

  17. Contingency Plans and Internal Controls Contingency Funding Plan Should: Identify Stress Events Assess Levels of Severity and Timing Assess Funding Sources and Needs Establish Liquidity Event Management Processes Establish a Monitoring Framework

  18. Capital Trends Balanced Asset And Net Worth Growth Has Maintain NWR Source: NCUA

  19. Capital Management Strategies Managing Your Net Worth Ratio Financial Profile Assets Total Assets $414 MM Growth 12.4% Capital Profile Net Worth Capital $33.9 MM Net Worth Ratio (NWR) 8.2% Earnings ROA 0.45%

  20. Capital Management Strategies Managing Your Net Worth Ratio Financial Profile Assets Total Assets $414 MM Growth 12.4% Capital Profile Net Worth Capital $33.9 MM Net Worth Ratio (NWR) 8.2% Earnings ROA 0.45%

  21. Comments and Questions STEVEN HOULE, CFA DIRECTOR, ADVISORY SERVICES 800.442.6427 214.703.7882 shoule@catalystcorp.org

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