To understand the ALCO Process, we must first understand how it came to be. The first session of our 6-part series provides the logic for the ALCO Process and includes a sample ALCO Policy. In this session we will also explain why we feel a single consolidated policy is the appropriate tool for the upcoming era.

1. The ALCO Process Is Your Board on Board For The New Environment? KPN Consulting

4. The ALCO Process New Areas for Growth & Profitability Residential Mortgages Typically Fixed Rates for 3-5 years Commercial “Mini-Perms” Commercial Real Estate Loans (Typically Owner-Occupied) With 5-15 Year Rates Mortgage Backed Securities Fixed Rates with Additional Issue of Maturity

14. The ALCO Policy KEY ALCO COMPONENTS Interest Rate Risk Management Profit Spread Management Capital Management Liquidity Risk Management Funds Management Investment Risk Management

25. Role of Wholesale Funding 12/31/04 – 12/31/09 Bank Thrift Industry Data 2004 2005 2006 2007 2008 2009 Deposits $6,585 $7,141 $7,825 $8,546 $9,037 $9,227 Mutual Funds $8,107 $8,906 $10,414 $12,039 $9,601 $11,121 Total Wholesale Funding $1,907 $2,077 $2,160 $2,464 $2,673 $1,852 Total Assets $10,106 $10,877 $11,860 $13,039 $13,853 $13,134 Wholesale Funding / Total Assets 18.9% 19.1% 18.2% 19.7% 19.3% 14.1%

32. Karl Nelson (770) 262-8446 [email_address]