CMS Case Study

Summary of Potential Strategies - 12/31/2021

STRATEGY

EXPECTED RESULTS

RISKS

1.

Loans :  Update on credit quality and concentrations.

 Loan growth key to NII

 Earnings/capital levels.

growth & NIM expansion.

 Reduced liquidity (current excess).

 Discuss pricing, term, and structure trends. - Impact of excess liquidity industry wide? - Competition? - Impact of higher market rates? - Fixed vs. adjustable vs. variable. - Review spreads.

 Discuss @ ALCO.

 Increase exposure to rising rates if fixed rate focus.

 Discuss @ ALCO.

 Review impact to IRR and earnings of funding future loan growth with investment cashflow.

See alternative simulation with first year of investment cashflow funding loan growth.

 Loan Collateral Update – Can we pledge more to the FHLB?

2. Investments/Wholesale:  Review impact of purchases in 2021 and discuss plan for purchase and re-investment for 2022.

 Trade-off between earnings and cash liquidity.

 Unrealized losses on securities if rates rise.

 Discuss @ ALCO.

 Rising rate NII sensitivity.

 Impact of higher rates? -

What did we use for budget for yield estimates? Are we targeting income? - Does it change the current plan? With market sell off does it makes sense to shorten purchases or are we comfortable with duration and outperforming yield? - AFS vs. HTM in context of unrealized G/L.

 Option/premium risks.

 Potential for credit risk.

 Discuss @ ALCO.

Cloyd Bank & Trust - Page 35