Strategy Levers
This strategy lever includes loan and investment income
What is Yield on Assets?
This happens to net worth if ROA is positive and asset growth is flat
What is an Increasing Net Worth ratio?
This is described as the revenue and expense generated from the balance sheet
What is income statement?
During a recession, interest rates will likely do this
What is fall?
ALM is largely trying to help teams understand this key risk
What is interest rate risk?
Certificate expense and borrowing expense are key components of this strategy lever
What is Cost of Funds?
This will typically happen during periods of accelerated asset growth and low to no earnings
What is a declining net worth ratio?
This is the largest component of Operating Expense
What is compensation and benefits?
During a recession, this strategy lever is most likely to increase
What is ECL/PLL?
What is $1 Million?
Interchange income plays a key role in this strategy lever
What is non-interest income or fee and other income?
0% ROA and 0% asset growth will cause the net worth ratio to do this
What is a flat net worth ratio?
Income from assets minus dividend expense is described as this
What is net interest margin?
The Federal Reserve bank has these two mandates
What is maximum employment and price stability?
This methodology helps institutions understand the market value of equity/capital
What is NEV?
When a loan is delinquent, then is charged off often impacts this strategy lever
What is ECL or PLL?
This would be the approximate net worth ratio if a $1B credit union with a 11% net worth ratio merged with a $500M credit union with an 8% net worth ratio
What is 10% net worth ratio?
A cash flows statement is helping decision makers understand exposures to this risk
What is liquidity risk?
This happens to interest rates when inflation is picking up
What is increase?
This ALM tool typically forecasts margin and ROA over the next 12 months in a flat growth scenario, in shocked rate environments
What is static NII?
Depreciation expense and rent expense are components of this strategy lever
What is Operating Expense?
As a billion dollar credit union with 5% asset growth and a 10% net worth ratio, this ROA would essentially keep net worth flat
What is 0.50% or 50bps?
The combination of the income statement and balance sheet is often used to create this type of report to help measure where we are relative to KPIs
What is a key or financial ratio report?
In general, this type of a yield curve is a challenging environment for financial institutions to
What is a flat or inverted yield curve?
Common NEV risk limits center around these two ratios in a +/- 300bp shock
What is NEV volatility and NEV ratio