CMS Case Study

Management’s Response – Liquidity Management – Unfunded Commitments Mrs. CFO will work with the Senior Lending Officer and Senior Credit Officer to determine appropriate assumptions for the funding of these commitments and will ensure they are reflected in the liquidity management reports by the end of the 4Q21. Liquidity Management – Report Monitoring Relative Importance = 2 Type of Risk Identified = Liquidity CRI determined that adequate documentation is maintained in support of calculations and/or assumptions used in projecting cash sources and uses. CRI found the Bank used the FHLB total of safekeeping pledge system market values as of May 31, 2021 rather than June 30, 2021 in calculating the on Balance Sheet Liquidity Calculation. The difference was $56,560. CRI recommends the Bank utilize the most current information in calculating the liquidity management reports unless reports are not yet available. Reports should be reviewed by a member of management independent of the preparation process to ensure accuracy. Management’s Response – Liquidity Management – Report Monitoring Procedures are already in place to minimize the risk that an error is undetected. Mrs. CFO will work with the Accounting Department to reinforce the importance of double ‐ checking the inputs.

Backtesting Results

We obtained the IRR report prepared by Darling Consulting Group as of December 31, 2019, with forecasted December 31, 2020 balance sheet and income statement totals and performed backtesting procedures. Backtesting procedures included comparing the forecasted income statement results for the 12 ‐ month period ended December 31, 2020, to the actual results for the same period.

Significant results of the backtesting are included below:

Actual

Forecasted Difference

Net Interest Income* Net Interest Margin

$20,743

$17,645

$3,098 ‐ .31%

3.11%

3.42%

*In thousands

The difference in net interest income (NII) was due to following factors:

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