CMS Case Study

Investment/ALCO Committee Meeting Minutes 05/27/21

similar investment products had been purchased in April & May up to the date of the meeting, and the Bank was till sitting on ~$110MM excess cash. The Committee agreed that the elevated level of cash and lack of net loan growth warranted continued investment purchases to improve NII. Mr. Mitchell also presented an illustration of the impact of subsequent investment purchases that reflected a $1MM difference in annual earnings each of 5 years if $75MM in investments were not initiated. Mrs. CFO stated that upon consideration of current market rates along with the deposit growth the Bank was continuing to experience, Management had reduced CD Board rates effective April 20 th , and the Cloyd Prime, Cloyd Money Market & Business Money Market account rates would be reduced in June after adequate required notification to customers. Therefore, NII should show the positive impact of these in the next couple quarters. Due to competitive loan offerings, Management had requested Mr. Mitchell run a simulation of the impact of $50MM in loan originations made up of $10MM Res 30Y Fixed @ 2.875%; $15MM 5Y Commercial @ 4.00%; and 10Y Commercial @ 4.00%. He presented the simulation which showed a significant positive impact to earnings in all scenarios and in every year for 5 years. The Committee agreed it was prudent use these loan buckets to help generate net loan volume. Mr. Mitchell presented the EVE calculation and the Committee acknowledged that the calculation is still below the policy guideline in the -100 bps scenario. However, the calculation show improvement to -19.2% from -23.7%. 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 $22MM PPP loans, was low at 8.51%, but above the regulatory minimum. Mrs. CFO stated the capital ratios would improve in June. The $30MM HC Sub Debt Issue settled in April, and ~$10MM would be contributed to the Bank in May. The ALCO committee adjourned at 10:00 am.