CMS Case Study

Investment/ALCO Committee Meeting Minutes 08/19/21

ALCO Committee Meeting August 19, 2021

The ALCO/Investment Committee meeting was held on August 19,2021. Those in attendance were: Chairman of the Board , Four outside Directors , President/CEO , COO , CFO, Senior Loan Officer , Mr. Smith, Mr. Frank and Mr. Mitchell of Darling Consulting Group. Mr. Chairman called the meeting to order. The committee discussed the following Industry Outlook for 2021:

• NIM Pressure

o 2021 Earnings masked by PPP fees/forgiveness o Concerns mounting for many banks in terms of 2022 and 2023 o Inconsistent volume & low pricing given excess liquidity o Payoffs limiting growth outlook

• Loan Volumes/Rates

• Deposits

o Where did growth come from? o How long will it last?

• Investments

o Tight spreads across most sectors o Opportunity cost of sitting on excess cash

• Credit Quality

o Holding up for most in the industry These points continue to dominate discussions, and Management remains optimistic. Mr. Frank presented the Bank’s Balance Sheet changes, which showed quarter over quarter growth of $40MM, and an unchanged spread. The Bank had been able to overcome the negative effects of NIM compression with volume, and the committee agreed that diligent efforts to produce quality volume in earning assets and low-cost funding, plus improvements in non interest income/expenses were all necessary to support future earnings. Mr. Frank stated that CB&T wasn’t under as much pressure as many of their other clients. He showed that the Bank was $1.4MM better off than the simulation showed a year ago, due to volume. There was ~$38 MM in loan originations for the quarter at a weighted average yield of 3.63%, but a net decrease of $6 MM, due to paydowns. The Bank continues to have a strong loan pipeline which helped to offset routine paydowns, as well as paydowns due to both customer cashflow availability and industry competition. The Bank continued to see deposit growth amounting to $30MM across all NMDA product categories while keeping rates low to mid-market; and only $6MM of that growth was in Public Funds. Mrs. CFO stated that ~$4MM of originated Residential Mortgages (5/1 & 7/1 Arms, and 5,15,20,30 fixed products) were retained for the quarter ($14MM YTD). She further stated that