CMS Case Study

Cloyd Bank & Trust Policy Manual

Subject:

Investment Policy

Date: 8/08/21 Reviewed: 8/19/21 Approved: 8/19/21

Section:

Management

1. Purpose The purpose of this policy is to establish a framework within which the Bank may maximize earnings potential by acquiring assets (other than direct loans) within prudent guidelines designed: • To enhance profitability within the overall asset/liability management objectives of the bank. Q • To absorb funds when loan demand is low and infuse funds when demand is high. • To provide liquidity necessary to conduct the day-to-day business activities of the Bank. • To provide a degree of high credit quality assets to the balance sheet. • To provide a medium for the implementation of certain interest rate risk management measures intended to establish and maintain an appropriate balance between the sensitivity to changes in interest rates of: 1) interest income from loans and investments; and 2) interest expense from deposits and borrowings. • To provide collateral for pledging requirements. • To generate a favorable return on investments without undue compromise of other objectives. • To evaluate and take advantage of opportunities to generate tax-exempt income when it is appropriate given the Bank’s tax position. Generally, these assets should have the following fundamental characteristics: • The existence of a resilient secondary market in which assets may be sold at market prices; • Obligors should carry high quality debt ratings; or, if not rated, should evidence, on a documented basis, a strong financial position. Our safety, liquidity and interest rate risk standards will not be compromised in favor of increased rate of return. The Bank shall consider investment type, credit quality (including maximum credit exposure to one obligor at any one time) and maturity of investments. Consideration will be given to each investment’s risk-weight as determined by regulatory Risk-Based Capital Guidelines. Additionally, this policy is to be reviewed annually by the Asset/Liability Committee. All changes recommended by the Committee must be formally approved by the Board of Directors.

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Board Approval 8/19/21