CMS Case Study

Investment/ALCO Committee Meeting Minutes 02/17/2022

ALCO Committee Meeting February 17, 2022

The ALCO/Investment Committee meeting was held on February 17, 2022. Those in attendance were: Chairman of the Board , Four outside Directors , President/CEO , COO , CFO , Senior Loan Officer , a nd Mr. Mitchell of Darling Consulting Group. Mr. Chairman called the meeting to order. The committee discussed the following related to the current economic environment:

• Margins are Under Pressure

o Asset yields still moving lower while funding costs “bottoming” o Can we quantify the potential NII decline? o How much growth will be needed to offset? o Loan growth expectations are modest, and pay-offs persistent o Asset extension fears are out there o Investment strategy dependent upon loan and deposit outlooks

• Excess Cash Still Searching for a Home

• Deposit Uncertainty Remains o With multiple years' worth of growth pulled forward, the most prepared groups are:  Quantifying the magnitude of potential “surge”  Identifying the sources  Forecasting outcome bands  Continuing efforts to bring in more core deposit accounts • Many financial institutions planning to “lag” on increasing deposit rates in next rising rate cycle and accept and account for potential deposit outflows. Will contract the swollen bond portfolio or borrow to offset. • Current vs. future credit quality, things look improved but are still uncertain. UPDATE FROM THE FED: • November o Jerome Powell Re-nominated as Fed Chair o $15B/mo. Taper Announcement (ending in June) o Consensus 1 Rate Hike in 2022 (25bp) • December o Inflation is Transitory

o $30B/mo. Taper (ending in March) o Consensus 3 Rate Hikes in 2022 o Targeting first hike in March

• January