CMS Case Study

Strategy Formulation - 3/31/2021

Objectives: 

Increase current earnings

 Maintain interest rate risk exposure within policy limits  Targeted Liquidity Minimums:  Tier 1 Basic Surplus 0%  Tier 2 Basic Surplus with FHLB > 4%  Tier 3 Basic Surplus with FHLB and brokered > 8%  Targeted minimum capital ratios

 Leverage = 8.00%  Risk-based = 12.50%

Elements of Strategies/Discussions: Current Environment

 Continue to analyze balance sheet changes since March 2020 with emphasis on impact of deposit inflows on liquidity/IRR planning and management  Update on rate outlook. Yield Curve has steepened. Initial recovery looks strong, but Fed insisting on holding rates lower for some period of time

Deposits Pricing/Growth 

Review current rates and discuss ability to reduce further  Update on Public Deposit Balances/Pricing and Collateral  Update on competitive landscape.  Opportunities/Challenges?  Discuss pricing strategy relative to future market rate increases

Liquidity Planning 

What are we targeting for on balance sheet liquidity?  Expectations for deposit balances. Impact of rising rates?  Deposits up $172MM in last 12 months. How much is at risk?

Lending 

Discuss Loan Growth Capacity

 Update on outlook for volume and pipelines  Review current pricing and market dynamics and competition

Investments 

Review Impact of steeper curve on pricing and yield  Discuss in terms of Liquidity position and IRR  Discuss benefits/risks of additional investment purchases

Other Discussion Items:  Review Key Assumptions within IRR models, NII Lookback testing & Stress Testing

Cloyd Bank & Trust - Page 35