Another Look at NEV

By Mark H. Smith
CEO, Mark H. Smith Inc.

Net Economic Value Analysis (NEV) is a powerful, but oft misunderstood, methodology to estimate interest rate risk (IRR). This article will erase the misunderstandings about NEV and illustrate some of the advantages this approach offers for small and mid-sized credit unions. NEV analysis is an excellent method to estimate all of the IRR posed by the credit union's current balance sheet, regardless of maturity and complexity. More importantly, credit union officers and volunteers would be looking to keep the credit union operating safely and soundly through difficult times. NEV is one way to aid in this long term goal.

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Economic Update

The good news is the election cycle is finally behind us. Some would say the bad news is the people that brought us to the precipice that the talking heads call the Fiscal Cliff are still running the show. With the so-called Fiscal Cliff rapidly approaching, The Wall Street Journal polled a group of economists as to their outlook on this event. Approximately 20% felt like the two sides would compromise and make measurable progress in controlling spending and reducing the deficit. Approximately 20% opined that we were about to go over the Fiscal Cliff and suffer the consequences. The remainder, approximately 60%, felt like the Legislative and Executive Branches would kick the can down the road for another year or two, resolving little, leaving no clear direction as to the future.

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Upcoming Webinars

In December 2012, we will wrap up our webinar schedule for the year with two scheduled webinars:

• December 5th: ALMPro^® Dashboard Panels 4 & 5
  and Report Sections 4 & 5 for ALMPro Clients
• December 12th: Swimming with the Sharks—
  Credit Union Bond Basics Part II

We are formulating our webinar plans for next year. NCUA is proposing a liquidity risk regulation that will impact almost all credit unions at some level. NCUA is also proposing changes to its recently adopted interest rate risk regulation. Concentration risk will continue to be a major topic in the upcoming year.

We will cover all of these areas and more in our 2013 webinar schedule which will be posted on our website in early January. As always MHSI webinars are presented at no charge and carry no obligation on the part of the attendee. We do not market our services in our webinars.

Click for for the full webinar schedule.

Webinar News

MHSI has archived almost all of its webinars and newsletters. They are available through our website and we encourage you to access and use them.

To access these archived webinars, register here.

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