CREDIT UNION ASSET LIABILITY MANAGEMENT SERVICES

Balance sheet risk management is an ever-evolving challenge. Asset liability management services can help empower credit unions with actionable data, regardless of size or complexity. That data equips credit unions to better manage their balance sheets in a fluid economic environment.

Catalyst Strategic Solutions' highly experienced ALM team leverages a full range of services. These services are customizable, ensuring your credit union can access the ALM services you need.

Catalyst's ALM service for credit unions offers two distinct platforms to meet diverse balance sheet requirements and management expectations. Both platforms are certified by an independent third party, giving credit unions and their examiners confidence in the ALM models.

The Catalyst ALM team works directly with credit unions to develop customized ALM solutions that achieve results. Professional services include:

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Credit Union ALM Services

ALM reporting packages

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.
ALM model validation

Catalyst is a long term national provider of ALM 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 Catalyst to verify the soundness (accuracy/validity/reasonableness) of risk management solutions and identify areas for potential improvement.
ALM model assumption review

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.
ALM integrity analysis

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 analysis

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

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.
Liquidity stress analysis

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.

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ALM Service Supplements

Online "what-if" capability

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.
Analysis review

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

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

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

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

Beyond traditional ALM services, Catalyst Strategic Solutions also assists in the following areas:

Additional ALM Services

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ALM Services FAQs

What is the goal or purpose of Asset/Liability Management (ALM)?

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.
Who is responsible for managing interest rate risk?

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.
How can interest rate risk (IRR) be measured?
There are three methods as defined below:
1. GAP: adding all interest-earning assets that re-price or mature within a specified timeframe and subtracting the interest-bearing liabilities that re-price or mature in the same time period
2. Income Simulation: projecting income over a specified timeframe and computing the change in income over rising and declining interest rate scenarios
3. Net Economic Value (NEV): computing the cash flows of all interest-earning assets and interest-bearing liabilities, then discounting or deriving a market value of these assets and liabilities; the result would state the impact that changes in interest rates would have on equity
Why should a credit union be concerned about interest rate risk?

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.

Resources:

Meet the ALM Team PDF icon

ALM Services Brochure

Contact

"Catalyst" is a brand name for the financial services business conducted by Catalyst Corporate Federal Credit Union ("Catalyst"), both directly and through its subsidiaries, including CUSOURCE, LLC, d/b/a Catalyst Strategic Solutions ("CSS"). Balance sheet management services and asset liability management services are offered through CSS, a SEC registered investment adviser. CSS is a separate entity from Catalyst and all investment decisions are made independently by CSS employees. Neither Catalyst nor CSS provide its clients with legal, tax or accounting advice.