Search: "interest rate risk"

What Is Your Alternative To OTS For Prepayment Information?

With the OTS having been merged into the OCC, credit unions are looking for alternative sources for loan prepayment information to use when quantifying interest rate risk (IRR).  Unfortunately, there are a limited number of publicly available sources for this information.  The Securities Industry and Financial Markets Association (SIFMA) is one publicly available source that […]

How Do You Know Your Modeling Assumptions Are Right?

Interest rate risk modeling requires the user to make assumptions about member and management/board behavior.  For example, some members will pay back their loans ahead of schedule and the rate of prepayment will increase if rates fall and decrease if rates go up, especially on mortgage-related products.  Likewise, the incentive for members to move some […]

Record Low 10-Year Treasury Rates and Net Interest Margin

On September 22nd, the 10-year Treasury Rate touched another historic low with a yield close to 1.7%.  This is a critical measure, as many credit union assets are priced off of the longer end of the yield curve.  There are many factors contributing to the low yield, including: The Fed’s decision to sell some shorter-term […]

Excerpt: Silo Risk Management Needs To Stop

Many credit unions are beefing up their risk management process.  However, a critical component of the risk management process that is missing for many is evaluating and managing risk in aggregate. According to conventional wisdom, risk is quantified and managed in silos—including interest rate risk (IRR), credit risk, concentration risk, etc.  External forces no longer […]

Auto Lending: The Concerning Slow Decline

Traditionally, auto loans have been the “bread and butter” of credit union loan portfolios.  However, 1st mortgages have claimed that honor with short- and long-term trends showing continued declines in auto loans as a percent of total loans for the credit union industry’s balance sheet.  Auto loans have been consistently decreasing from roughly 40% of […]

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