CMS Case Study

Investment/ALCO Committee Meeting Minutes 2/18/21

cases was ~$300-350k in each of the 5 years modeled, and less but positive impacts in the first two years of the other scenarios (up 200bps, Yield Curve Twist, Delayed Yield Curve Twist). The Committee agreed it was prudent to continue with bond purchases to deploy excess cash and understood the time sensitive nature of bond purchases and sales along with market conditions and expressed the authority to make those purchases within policy guidelines resides with Management. As follow up to last quarter’s meeting discussion, Mrs. CFO stated that Management had followed through with a portfolio restructuring strategy analyzed and presented by Raymond James (attached). The strategy was primarily to sell ~$11MM of low/negative yielding accelerated prepayment sensitive MBS bonds and reinvest at higher yielding MBS. The impact of the strategy was an improvement in book yield of .70 and an increase in average life of 5.20 years. Mr. Frank presented the EVE calculation and the Committee acknowledged that the calculation is still below the policy guideline in the -100 bps scenario. The result had only changed slightly from -22.2% to -23.7% for the quarter. The Committee agreed that corrective action was still not necessary and will continue to monitor and discuss. As of quarter-end, the Bank’s Tier 1 Leverage Ratio including the $22+MM PPP loans, was adequate at 9.00%, and above the regulatory minimum. Management continues to discuss capital needs for future growth and expects to have an official offering ready in 1Q or 2Q. The ALCO committee adjourned at 10:00 am.