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Intelligent Solutions for Risk Management Looking for alternatives to manage interest rate risk? Derivatives are a must for a growing institution HedgingEssentials is an expeditious way to add derivatives to your interest rate risk management tool kit. Without a focused effort it can take months to get your institution set up to trade. Take advantage of the same experts at Chatham Financial who advise more than 150 banks and credit unions across the U.S. in the use of derivatives for managing interest rate risk. We help financial institutions overcome the accounting, operational, and regulatory hurdles and advise senior management and the board in establishing the appropriate risk policies and strategies. Educate leadership to establish appropriate policies and procedures • Board and Management Education • Derivative and Hedge Policy • Hedge Strategy Development HedgingEssentials Establishing Interest Rate Hedging Capabilities at a Community Bank PROBLEM: After exhausting traditional methods to manage interest rate risk on-balance sheet, a growing community bank was seeking to acquire access to interest rate derivatives to mitigate exposure to rate volatility without having to alter its mix of assets and liabilities. The bank's Board expressed concern about derivatives based on fear of complexity and a lack of understanding of how they work. CASE STUDY Identify and negotiate dealer counterparty relationships • Recommend best-fit Counterparty Alternatives • Negotiate and Document ISDA Agreement Ensure adherence to derivatives accounting and regulation standards • Hedge Accounting (ASC 815/820) • Dodd-Frank (Title VII) HedgingEssentials is a critical first step in preparing your institution to be able use derivatives to more effectively and efficiently manage interest rate risk at the balance sheet level and loan by loan. OBJECTIVES • Secure Board and management team buy-in for using derivatives to manage interest rate risk • Establish a derivatives trading line with dealer counterparties (including ISDA documentation) • Avoid regulatory and accounting blow-ups SOLUTION Chatham understood the Board's concerns and successfully provided the bank access to derivatives by delivering the following: Hedge Policy: A customized hedge policy that defined the appropriate risk limits and controls for the use of derivatives at the bank. Board Education: Board and management education in how to successfully manage most interest rate risks using the simplest derivative products available. Counterparty Relationship: A fully-negotiated ISDA Agreement with an appropriate dealer counterparty that provided a source of liquidity while minimizing the bank's exposure to the counterparty. Accounting and Regulation: Trained the accounting and finance teams in hedge accounting basics. Assisted the bank in navigating Dodd-Frank Act regulations prior to executing its first derivative transaction.

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