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Headline: CU-ALM Report: Under the Lens: Why Credit Unions Need a Seposit Analysis

Analyzing Non-Maturity Shares and Deposits

ALM

By Jeff Johnson, Financial Analyst

The Office of Thrift Supervision (OTS) went away in 2011 and along with it went their published decay rate assumptions used by many ALM models. Many regulators are disallowing the use of OTS data since the NCUA, Fed, and OCC have deemed it to be outdated. NCUA in 2001 also commissioned NERA to propose suggested maturities for credit union deposits but the results, now 10 years old, were never adopted by NCUA.

With the obsolescence of this macro data, credit unions are left on their own as to what assumptions to use when modeling the impact of non maturity shares and deposits (NMS) on interest rate risk (IRR). Among the options are, estimates by management, a cost effective peer deposit index, or conducting a credit union specific NMS study.

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Economic Update: Economy-Forward Interest Rates

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By Jason Williams,
Financial Analyst, Mark H. Smith Inc.

There was some welcome economic news since our last economic update over the summer. United States Gross Domestic Product (GDP) was revised upward again to an estimated 4.6% growth in the second quarter of this year. That puts economic activity at 2.6% above its year ago level. This is coupled with inflation that is estimated at just 1.7% for the second quarter 2014.

The bottom line is that it appears the economy is moving forward and economic activity was stronger in the second quarter 2014 from previous reports.

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NCUA Blinks—Agrees to Reconsider Risk-Based Capital Rule

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

On September 29th NCUA announced that it will make significant changes to the proposed risk-based capital rule and re-expose the rule for a second comment period. Sometimes the good guys and gals win. This is one of them. The proposed rule was seriously flawed. We could go on for pages pointing out the problems which would have caused a negative impact on many credit unions but we don't have the time or space to do so.

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Please Take Our IRR and Liquidity Risk Survey

black-box Mark H. Smith, Inc. is conducting a five-question survey about IRR and Liquidity Risk. Please take a moment and submit your answers. Answers are being collected in the aggregate and are not tied individually to responding readers and their credit unions. We will share the results with you in our next issue.

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Sept./Oct. 2014

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Client Corner: Regulator Sense and Nonsense

By Cynthia R. Walker, COO, Mark H. Smith, Inc.

Here are some of the suggestions, criticisms and requirements that I have heard from regulators in the last 6 months. Read More

Upcoming Webinars

Maximizing Profitability Today and in the Future

Part I—Maximize Your Profitability in Q1-2015
(Nov. 4th, 12:00 noon MST)

Register for this webinar

* Analyze your NII for risks and opportunities
* Adopt balance sheet strategies to improve current profitability
* Identify the dangers of committing to long term fixed-rate assets now
* Use spread analysis to map the way to greater profitability
Part II—Protect Your Future Profitability in a Rising Rate Environment
(Nov. 11th, 12:00 noon MST)

Register for this webinar

* Hold the line on your cost of funds and say goodbye(maybe) to some deposits
* Understand average cost vs. marginal cost
* Identify and hold onto low-cost funds
* Minimize the cost of rate-sensitive deposits

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