As a trusted asset liability consulting firm, ALM First identifies balance-sheet risks through a rigorous, quantitative process rooted in modern financial management techniques. Armed with these results, ALM First professionals develop customized, client-specific strategies, enabling institutions to more effectively manage their balance sheets.
ALM First On-Demand lets you analyze "what-if" scenarios instantly via an online 24/7/365 web application (no software needed). It combines the complexity of ALM First’s modeling assumptions with the ease of a Web browser that is tailored to suit your individual needs. With the ability to change the composition of the balance sheet as well as coupon rates, you can instantly see the changes in income and economic value. This feature gives you a quick and general sense of the incremental risk versus earnings of balance sheet changes.
ALM First On-Demand provides a quick analysis of how changing assets, liabilities and coupon rates affect interest rate risk.
Your institution’s most recent ALM results get loaded in ALM First On-Demand. Then, you can see how your risk position and projected net income would change if you add or remove assets and liabilities.
Institutions need to continuously tune and improve model performance to get a clear and accurate picture of how interest rates impact today’s decisions and positioning for tomorrow. Model validations are part of a comprehensive ALM program that allows management, ALCO, Boards of Directors and regulators to have confidence in their modeling, forecasting and risk position. Finely tuned models are critical to sound decision making, understanding interest rate risk and improving earnings.
The asset liability management validation service provides an unbiased, third-party assessment of a depository institution’s IRR process, model and reports. They are offered at three different levels to meet the specific needs of the institution: ALM Parallel Analysis, ALM Process Review and a Full Validation (combination of the Parallel Analysis and Process Review). ALM First uses regulatory guidance to ensure its service offerings meet FFIEC, NCUA, OCC, FDIC and FRB directives. Because institutions do not all have the same goals, the validation can be customized to the needs of the institution.
ALM PARALLEL ANALYSIS
ALM First uses one of the most technologically advanced analytical models to perform an unbiased review of your financial institutions interest rate risk. This service encompasses an independent interest rate risk assessment utilizing the institutions data along with the ALM First model and assumption set. Results are then compared to the institution’s with differences highlighted and explained. Because accurate and, in some cases, institution dependent assumptions are critical to reasonable results, ALM First includes a Non-Maturity Deposit analysis as part of the service.
ALM PROCESS REVIEW
A process review is used to: fine tune the model, ensure the model is appropriate for the size and complexity of the institution and shed light on areas of improvement, best practices and regulatory guidance. The process review addresses the following four components of the ALM process as outlined in OCC Bulletin 2000-16:
- Modeling inputs, assumptions, data and methodologies
- Strengths and weaknesses of the ALM model
- Content and format of reports
- Documentation and controls related to the ALM process
Funds management, forecasting cash-flows, contingency funding plans as well as building a sound liquidity framework are more important than ever. ALM First works closely with clients to ensure their operational and regulatory needs are met. The level of service ranges from an “in-sourced” provider to assisting institutions fine tune their internal policies, processes and models.
A growing number of institutions are choosing to retain their MSRs rather than release their servicing when they sell loans in the secondary market. ALM First provides a rigorous process for valuing the mortgage servicing rights (MSRs) of your financial institution. This enables you to make well-informed risk management decisions utilizing our sophisticated in-depth analysis and reporting of expected performance under different rate scenarios.
In order to provide analytical insights into your intuition’s deposit book, ALM First evaluates non-maturity deposits via a rigorous econometric investigation of account behavior, coupled with qualitative overlays, supporting documentation, and sensitivity of key variables. ALM First has two levels of service to analyze NMDs:
- Sensitivity Analysis – this analysis estimates the economic value of non-maturity deposits based on their historical balance and interest rate behavior.
- Decay Analysis – for a more comprehensive view, ALM First’s decay analysis calculates vectored decay rates based on account age for each non-maturity deposit (NMD) type and for base, rising, and declining rate environments. Balance changes are tracked for each account individually.