ALM Supplemental Services

Our rate sensitivity analysis uses historical data to create a realistic picture of how your credit union’s prices move, relative to changes in market interest rates. This data is compiled in an easy-to-read report that will allow you to track your credit union’s trends, improve the accuracy of your modeling, and help guide future decision making.

Non-maturity deposit assumptions have big implications on a credit union's interest rate risk modeling results. It is critical to use assumptions that accurately portray how your credit union would most likely behave in order to get a realistic picture of that exposure. To accomplish this, the AIM team will do a thorough analysis of your credit unions non-maturity deposit account history to assess relevant patterns in member account behavior, which can be indicative of future experience.  Working with your credit union, we will use this information to determine appropriate assumptions that are realistic and conservative so you can feel confident when using IRR modeling results to make decisions.

The short-term nature of credit-unions' liabilities has long been an important risk factor to consider.  A liquidity stress test from AIM can help make that risk more quantifiable and actionable. Our analysis will identify shortfalls, help establish liquidity trends, and provide guidance in finding solutions.

Mismatching of cash inflows and outflows can put undue stress on a credit union’s balance sheet and create liquidity shortfalls, which can increase expenses in the form of borrowing costs. The AIM Service utilizes the Empyrean ALM software to model future cash flow projections and current liquidity gap. The ALM software can be used to stress test the credit union’s balance sheet with different assumptions regarding deposit growth, loan growth, changes in interest rates, etc., which affect the credit union’s liquidity position. Monitoring cashflows helps the credit union plan appropriately to meet demands for withdrawals and lending opportunities, while keeping borrowing costs down.

Fair value reporting takes all rate sensitive instruments on the balance sheet and compares the credit union’s book values to current market conditions. The results show potential gain/loss if the credit union were to liquidate those instruments in the current rate environment. These results are beneficial for analyzing the balance sheet’s relative market value and monitoring what the credit union’s books balances would be worth under current market conditions. This information can be used to guide management’s decisions regarding pricing in order to keep the balance sheet concentrations at appropriate levels.

The purpose of the Asset Liability Management Policy is to set forth the credit union's approach to managing both assets and liabilities in regard to interest rate risk. The Investment Policy sets forth procedures and parameters for investing the credit union’s surplus funds. Periodically, Asset Liability Management and Investment policies should be reviewed for accuracy, reasonableness and to ensure they still align with the risk tolerance of the credit union. AIM offers an outside review of the credit union’s current policies, suggesting appropriate updates and changes as needed. There are also sample policies available to ensure appropriate verbiage if creating a new policy, or to help strengthen existing policies