CMS Case Study

APPENDIX

B. Liquidity Targets and Sample Calculation The ALCO will choose a target number for the Basic Surplus (Deficit), expressed as a percentage of Assets. This number should generally be positive (BASIC SURPLUS), but it may vary as the Committee decides to maintain relatively large or small liquidity coverage, depending on their estimates of the general business climate, their expectations regarding the future course of interest rates in the near term, and the Bank's current financial position. Two additional factors that will impact the magnitude of the Basic Surplus target are 1) the available borrowing capacity at the Federal Home Loan Bank, as represented by qualifying loans on the balance sheet that are not part of the calculation, and 2) unused brokered CD capacity relative to the bank’s related policy limit on acceptable levels of these deposits. For this reason, current FHLB advance and brokered CD availability are part of the Bank's liquidity presentation. The Bank’s targeted liquidity minimums are as follows: I. If Bank operating with capital ratios in excess of Regulatory Well Capitalized minimums:  Core Basic Surplus (excludes FHLB borrowing capacity using loan collateral and brokered CDs) Minimum = 0%  Basic Surplus with FHLB borrowing capacity using loan collateral Minimum = 4%  Total Basic Surplus (Core + FHLB borrowing capacity using loan collateral + Brokered CD capacity) Minimum = 8% II. If Bank operating below capital ratios required for Regulatory Well Capitalized Status:  Core Basic Surplus (excludes FHLB borrowing capacity using loan collateral and brokered CDs) Minimum = 2%  Basic Surplus with FHLB borrowing capacity using loan collateral Minimum = 8%

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Approved by Board of Directors 1/20/22