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ALM Advisory

Custom analytics. Strategic modeling and validation. Personal, dedicated support.

ALM iconRecent regulatory changes have placed Asset Liability Management (ALM) programs, particularly interest rate risk (IRR), in the spotlight. As a result, more credit unions find themselves asking: How would a change in the interest rate environment impact our credit union? Would such a change cause our credit union to incur losses or create unnecessary risk exposure? How does our credit union create a comprehensive and effective asset liability management program that accurately measures our interest rate risks?

Accolade has been helping credit unions realize the answers to questions like these for the effective management of asset liability programs and IRR since 2007. And, we are here to help your credit union, too. Our IRR Analysis, Model Validation and CUAnalytics services offer credit unions guidance on their Asset Liability Committee (ALCO) process and provide credit unions with model review and/or independent model validation of their ALM programs.

Accolade can assist your credit union in developing a sound ALM program designed to help you to maximize your financial performance while managing your IRR. Through our IRR Analysis, we provide custom analysis, reporting and tools for strategic insight, empowering your credit union to effectively manage its ALM program and meet newly instituted regulatory requirements with limited demands on your time.

How does it work?

The foundation of our IRR Analysis is our staff, which works as an extension of your credit union—either in conjunction with your dedicated staff or as a cost-effective solution to having such dedicated personnel on staff. Regardless of how we integrate with your existing operations, your credit union is always in control—yet we do the work.

To begin, we’ll become familiar with the structure of your credit union’s balance sheet. Once we have a solid understanding, we will request your account-level detail so we can run it through models custom developed for your credit union. Our ALM professionals will analyze the data, update model assumptions and provide your IRR reports back to you, including those required by regulations governing credit union ALM programs, and an executive summary of your ALM program that can be shared with your board and Asset Liability Committee (ALCO).

We believe ALM education and understanding of model results are very important, so both are included in our advisory services. Our focus is on ensuring your credit union has all it needs to effectively manage a sound ALM program.

With Accolade IRR Analysis, your credit union can:

  • Get up and running quickly. Our services are customized, yet efficient.
  • Meet its regulatory requirements for ALM with accurate and detailed NEV, NII and GAP reports that meet the regulatory needs for credit unions.
  • Be assured of model efficacy and accuracy, as we value transparency. Your credit union will always be able to question, know and understand model assumptions and report analyses.
  • Confidently work with examiners and/or your board and ALCO.
  • Realize the value of maintaining a sound ALM program through a strengthened financial posture and a strategic vision for the future.

Have further questions about Accolade’s IRR Analysis? Read our FAQs. Or contact us to get started today.

Regulator requests drive many credit unions to use our Model Validation; however, we also have several credit union clients seek out our services because they want confirmation their models, assumptions and data are correct. After all, your credit union is making important decisions for its future based on results of its financial models. It’s vital to know if the underlying processes and assumptions are correct. Whether your regulator has made a request or your credit union is undergoing a self review, Accolade Model Validation can help your credit union mitigate its risk effectively through a Governance Review, Model Review and/or Independent Model Validation.

Our Model Validation is broken into three tiers to assist your credit union with whatever stage of validation it may need. We offer a high-level governance review, or a governance review plus a detailed model review or a governance review that includes a full and comprehensive independent model validation.

  • Tier 1 – Governance Review: Accolade Model Validation will review your credit union’s ALCO process—its policies, agenda and committee composition—to ensure your credit union is meeting ALCO best practices.
  • Tier 2 – Model Review: In addition to reviewing model outputs, we use individual record level data and sample testing to develop recommendations based on our 24 aspects of modeling.
  • Tier 3 – Independent Model Validation: Tier 3 goes beyond sample testing. We leverage our expertise to ensure your data is accurate and calculated properly and the processes from data entry to report generation meet regulatory requirements. We take your credit union’s balance sheet information and build our own model(s), conducting parallel testing to see how the models compare.

The key to making sound strategic decisions lies in having the correct information on which to base those decisions. Does your credit union have a convenient place to pull your financial ratios? What about those of a key credit union peer and/or peer group(s)? Do you have the ability to evaluate what your credit union would look like after you merged with another institution? CUAnalytics enables your credit union to gather such information conveniently and cost effectively via a software-free, web-based interface. Monitor changes in your balance sheet, review peer comparison data, or see how your credit union is performing overall with CUAnalytics.

How does it work?

Accolade’s CUAnalytics is a Web-based financial reporting tool that offers credit unions a greater understanding of their financial position and the means to manage it. It provides credit unions a variety of benefits, with convenience at the top of the list. CUAnalytics automatically pulls in a credit union’s 5300 data on a quarterly basis and gives credit unions the ability to enter additional information into the program, such as general cash flow data. From there, customized reports are ready to be generated and reviewed.

The four CUAnalytics reporting elements include: an estimated Capital Adequacy, Asset Quality and Earnings (CAE) score, trends, profitability and GAP analysis.

  • Estimated Capital Adequacy, Asset Quality and Earnings (CAE) Report: This report provides the calculated scores for Capital Adequacy, Asset Quality and Earnings (CAE), using NCUA’s most recent CAMEL parameters. The report compares the credit union’s ratios and scores to those of its peer group and provides an easy-to-read display of the CAE components and overall score.
  • Trends Report: This report contains financial trends for the previous two years and includes quarterly peer comparisons. Coupled with detailed charts, this report allows credit unions and their boards to quickly identify positive and negative trends and develop plans accordingly.
  • Profitability Report: This report presents a credit union’s income statement as a percent of average assets for the previous calendar year and the current year to date. Its easy-to-read format displays the credit union’s average balance sheet and income statement data.
  • GAP Report: This report provides a time-weighted GAP analysis that takes into account the timing of the differences between rate-sensitive assets and rate-sensitive liabilities. The report also provides a “market-sensitive,” time-weighted GAP analysis to more closely estimate the degree of IRR presented by the credit union’s GAP position. Most importantly, the GAP report provides rate-shock profitability impact analysis accompanied by easy-to-read charts.

For more information about how your credit union can purchase a subscription to CUAnalytics or to view sample reports contact us.

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