CMS Case Study

Investment/ALCO Committee Meeting Minutes 11/18/2021

ALCO Committee Meeting November 18, 2021

The ALCO/Investment Committee meeting was held on November 18, 2021. Those in attendance were: Chairman of the Board , Four outside Directors , President/CEO , COO , CFO , Senior Loan Officer, 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: • Short term rates to remain low. o The FOMC remains patient and most Fed officials are projecting rate hikes in 2023. o The markets expect the Fed to act sooner given inflation. o Inflation / CPI numbers will remain elevated for longer largely due to COVID related supply shortages, bottlenecks, elevated energy costs and labor market dislocations. o FOMC continues to push for inflation >2% AND maximum employment (dual mandate). o The economy is still well below maximum employment…the employment picture should be closely watched. o The unemployment vs. participation rate • Taper will come first, set to begin in this month. o Officially announced at the most recent November FOMC meeting. o Providing lots of notice so as not to surprise the markets or public and making clear that Tapering is not Tightening. o Flatter curve at belly of the yield curve; the 2‐to‐5‐year points, moving higher while longer end lower. • Global growth forecasts have shifted lower. o US Q3 GDP of 2%. o COVID is an ongoing global disruptor. o Competition for loans remain s intense with loan‐to‐deposit ratios at historical lows. o Funding costs will remain low, and many expect lower for longer coming out of this cycle Mr. Frank presented the Bank’s Balance Sheet changes, which reflected growth of $66MM. Mrs. CFO mentioned that $49MM was due to one Public Depositor who is an existing significant relationship. The entity had contacted the Bank beforehand to ensure that the Bank could accept the deposits due to the amount. Management made a deliberate decision to accommodate the request due to the relationship, but at the rate of .05%. The f unds were proceeds from a bond issue for the purpose of new construction and expectation of rolling off over a 2 year period. Mrs. CFO also expressed that the Bank had more than adequate securities to provide for pledging. Mr. Frank also pointed out that not only had the Bank’s balance size grown, but that the spread had improved .02% for the quarter.