CMS Case Study

The use of exchange-traded contracts requires board approval and must be designated as hedges under ASC815, Accounting for Derivatives Instruments and Hedging Activities.

12. Internal Control Objectives The primary internal control objectives relating to the Bank’s investment securities portfolio include: · Proper authorization for each transaction · Physical existence and proper ownership · Proper valuation · Adequate record keeping Procedures are to be implemented to provide that the above objectives are obtained. Although not a complete list, policies and procedures include: · Approval of commitments placed by the Asset/Liability Committee. Commitments placed should be reported to the Asset/Liability Management Committee and the full Board of Directors on a timely basis. · The maintenance of a detailed securities ledger showing the total portfolio outstanding at any one time. · The periodic comparison of broker’s advices and collateral receipts to the securities ledger and the general ledger by an appropriate employee who is independent of the execution of securities transactions. · The periodic confirmation and/or examination of securities held in safekeeping. · The valuation of the investment portfolio at least monthly. 13. Policy Exceptions Executing an attractive and appropriate investment not within these guidelines requires prior approval in writing from the President. Exceptions will be fully documented for ex-post approval by the Asset/Liability Committee and Board of Directors. In those situations where it may be appropriate to act in a manner that is manifestly inconsistent with current investment policy, a vote of a majority of the Asset/Liability Committee is required. Consent may be obtained by a telephone or email poll of the Committee. Any such amendments shall be reported to and ratified by the Board of Directors at its next meeting.

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Board Approval 8/19/21