Southwest Corporate's ALM service offers what-if scenarios to create confidence
What if interest rates continue to rise? What if zero percent financing comes back? What if the housing bubble pops? What if, what if, what if…
If your credit union used the Asset Liability Management Services backed by the power of BancWare, you can get the answers to all those what-if scenarios.
The integrated risk management solutions of BancWare ALM5 allow credit unions to measure and manage interest rate risk precisely and efficiently. With accurate and detailed analysis, managers are able to understand the impact of market changes on their balance sheet more clearly and to make informed decisions. Credit unions are able to model member behavior and market movement to stabilize margin and earnings effectively. They can also forecast future earnings, manage profitability, and comply with regulatory requirements.
“Large credit unions need BancWare if they have complexity in their balance sheet,” says Pat Gawenda, Manager of Southwest Corporate’s A/LM service. Complexity would include CMOs, step-ups, hybrid mortgages, or any type of product that is out of the ordinary.
Rio Grande CU, an $88 million dollar credit union in Albuquerque, New Mexico received its first BancWare analysis in June 2006. “Right away I saw the benefits in BancWare reporting,” says Chris Fitzgerald, CEO. “And as the A/LM team started to explain the report, I noticed that the step-up treatments in the BancWare report were modeled with more detail.”
As Fitzgerald saw, not all A/LM models are created equal – while formulas and theories may be the same throughout the industry, it’s what an analyst does with the data prior to using the model formulas that matters.
BancWare ALM5 analysis includes extensive data valuation, management review of assumptions, and testing for reasonableness of those assumptions. Credit unions also receive an onsite presentation of data, an explanation of the report, a summary report, and a comprehensive written report supported by excel file spreadsheets of the interest rate scenarios used.
“After forwarding over a few reports and agreeing upon assumptions,” Fitzgerald exclaims, “this is what I get. I’ve never had this much useable information, all based on our history and account level detail.” With the data files Rio Grande was able to provide, the A/LM team could create a report “so clean, we might not even have to do an internal budget anymore because it would all feed right in!” says Fitzgerald who considers the BancWare model “affordable and flexible.”
The A/LM analysts at Southwest Corporate can also run a “what-if” scenario analysis to quantify the impact of major decisions – such as a merger – prior to implementation. The credit union consults with an A/LM analyst about the decision and determines all the effects or changes that would occur given the “what- if” scenario. The analyst then runs the analysis and provides the credit union with a comprehensive report of the findings with the confidence of third party verification.
Use of BancWare’s simulation results can define more accurate earnings projections for budgeting purposes.
Four hundred fifty clients in 44 countries use the BancWare A/LM model. Southwest Corporate chose it for its robustness. For credit unions, this means that they get a highly advanced analysis of their interest rate risk AND the support of the Southwest Corporate A/LM team. “Our team doesn’t just analyze and run, we use the model and explain the results and analyze policy and support your decisions,” Gawenda says.
The A/LM Service at Southwest Corporate produces detailed “what-if” scenarios that create confidence in your strategic plans and decisions. For more information, contact a National Sales Executive at 800.301.6196 or email .
Some of the measurement tools used to assess risk:
· Gap analysis – for the short term of 6 months to a year is sufficient for non-complex credit unions
· Income simulation – for the short, 1 year, to intermediate, 2 year, assessment of risk within existing balance sheet and projected balance sheet
· Net Economic Value (NEV) – for the long-term assessment of risk over the entire life of a credit union’s cash flow stream within an existing balance sheet