Asset/Liability Management (ALM) Services

ALM reporting packages with customizable options deliver reliable results to improve decision making. Independently certified models accurately quantify risk, supported by the fastest standard turnaround times, with no added fee.

The ALM team is a long term national provider of validation services spanning all ALM models. The ALM team delivers an independent evaluation of credit unions' ALM programs. This is done using sophisticated models, industry best practices and the most current methods. This allows the ALM team to verify the soundness (accuracy/validity/reasonableness) of risk management solutions and identify areas for potential improvement.

A review is conducted of key modeling assumptions used in the risk management system, whether run internally or outsourced. Key assumptions are evaluated and tested for accuracy and reasonableness. Material differences are identified, summarized and presented, along with recommendations.

A detailed examination of balance sheet data files uncovers errant loan and deposit account elements. The review routinely reveals data omissions and inconsistencies due to data entry errors, mergers or core conversions. Identifying potential areas of improvement helps create a more accurate and reliable reporting process. Finding errors before members do helps maintain member confidence.

Non-maturity deposit assumptions have an enormous impact on the reported interest rate risk exposure. Examiners continue to place tremendous emphasis on understanding non-maturity deposits, as well as the modeling assumptions. This analysis evaluates account level historical data to identify specifics on withdrawal behavior, as well as demographic attributes.

Mortgage servicing rights analysis maintains and enhances member relationships. This helps manage balance sheet risk and produces income. The analysis determines the fair value of servicing rights, while assessing any impairment.

This dynamic projection identifies liquidity shortfalls across various stress scenarios. The analysis projects net cash flows based upon multiple factors. Those factors include growth, unfunded commitments, deposit runoff and changes in interest rates.

Users to perform “on-the-fly” analysis simply by logging into TranZact. Managers have the ability to perform ad hoc analysis and generate instant ALM results. The tool is ideal for a quick answer during Board and ALCO meetings, strategic planning, and even brainstorming sessions.

Work with a dedicated professional that reviews your analysis and offers consultation with management, the Board, or ALCO.

Review and update policies as needed to ensure proper control, compliance, and oversight, considering asset size and balance sheet complexity.

Our staff has extensive knowledge and experience in ALM and balance sheet management. In-person visits can be tailored to meet your needs.

A fair value analysis provides a concise view of the current balance sheet based on current market conditions.

The purpose of ALM is to ensure that a credit union’s spread and pricing policies are sufficient over the full interest rate cycle to achieve capital goals and to avoid undue interest rate risk. This can be achieved by managing the rate sensitivities of interest-earning assets and interest-bearing funding sources.  

Ideally, the responsibility for managing interest rate risk belongs to the Asset/Liability Management Committee (ALCO). This would include, at a minimum, the president/CEO, vice-president finance/CFO, and one or two members of the credit union's board of directors.

There are three methods as defined below:

Changes in interest rates can impact earnings and capital. A simple example: A credit union has one 15-year fixed rate mortgage loan earning 5.0 percent that is funded with six-month share certificates currently paying a dividend of 3.0 percent. If interest rates rise and the credit union increases the dividend rate on the share certificates to 5.50 percent, interest expense would then be greater than interest income. This can have devastating effects on credit unions, and it’s imperative that these scenarios are accounted for and managed.