c. myblog

December 9, 2010

NEV vs. 17-4 Gross Test

Don’t be confused.  The 17-4 Gross Test is not the same thing as net economic value (NEV). NCUA describes the 17-4 as a “quick and dirty” interest rate risk measure.  It is calculated by devaluing fixed-rate mortgages by 17% and adjustable-rate mortgages by 4%.  These devaluation factors represent the price loss on newly issued loans.  […]

November 18, 2010

Person-to-Person Payments and the Rise of PayPal

It’s no secret that advanced cell phone technologies have begun penetrating our everyday lives.  Consider that in the third quarter of 2010 alone, 81.1 million Android handsets were sold and 13.5 million iPhones were sold according to International Data Corporation (IDC).  Moreover, according to FierceMarkets, U.S. cell phone penetration reached 101% at the end of […]

November 15, 2010

Do Lower PLL Ratios Mean The Credit Crisis Is Over?

On the surface, recent credit union provision for loan loss (PLL) trends seem encouraging; industry-wide through second quarter 2010, the ratio of PLL to average assets has declined by 31 basis points to an annualized ratio of 0.81%.  However, delinquencies and charge-offs as a percent of loans have only decreased by 11 basis points and […]

November 4, 2010

Hope For The Best, Budget For Reality

Recently, during The Economist’s Buttonwood Gathering, Raghuram Rajan, current professor at the University of Chicago’s Booth School of Business and former chief economist at the IMF, expressed concern over our government’s need to address the deficit.  Rajan stated that, “We need to have a path which brings [the deficit] under control.  It’s very important to […]

October 29, 2010

Does Your NEV Analysis Really Capture Fair Value Of Assets?

If your credit union runs a Net Economic Value (NEV) analysis as part of the A/LM process, how do you determine the credit union’s loan discount rate assumptions? Sometimes we hear credit unions say that their current loan offering rates are used as the discount rates in their NEV models.  We do not believe this […]

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