A Proactive Approach to Liquidity ManagementA. Maximum Borrowing Line at FHLB B. Qualifying Loan Collateral at the FHLB (net of haircut) C. Excess Loan Collateral (if A < B) ... liquidity
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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