NEV is one of two measurements that ALM modeling uses to assess your interest rate risk. NEV stands for net economic value and is sometimes referred to as the economic value of capital at risk. NII represents net interest income, sometimes referred to as the income simulation. In this article, we’ll define NEV and discuss examples of how to read the measurements.

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ALM modeling is used to gain insight into the potential impacts of changing interest rate environments on both the credit union’s equity or capital as well as its profitability or ability to generate earnings. In short, ALM modeling is for measuring interest rate risk.

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NII is another measurement that ALM modeling uses to assess your interest rate risk. Net Interest Income (NII) is a bit easier to understand than its counterpart, NEV, because the timescale is defined.

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One important but often overlooked aspect of an ALLL calculation is what loans should be grouped together to determine your loan loss calculation. This is called “pool determination.”

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