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BancPath® - New Features Added in Response to Regulatory Guidance, Client Requests and Exam Trends Asset Management Group, Inc. (AMG) is a wholly owned subsidiary of Country Club Bank and has been serving community banks since 1995. AMG offers a range of asset/liability management services designed to meet regulatory requirements and expectations while also managing risk and improving margins.
AMG has the ability to update reports in response to regulatory guidance, client requests and exam trends. Today’s Pro Shop touches on some of the new reports and tools AMG has recently built in to our services. These have been added to address the demand for increased reporting and analysis as a result of the historic rise in interest rates and the bank failures last year. These new reports and tools include 1) Liquidity Cashflow Worksheets, 2) Stress Test Worksheets, 3) Historical Core Deposit Study and a 4) Dynamic Balance Sheet Option. Liquidity Cashflow Worksheets The liquidity cashflow worksheet forecasts the banks cash position out 365 days in monthly and quarterly increments. The forecasts done each period that have always appeared in the BancPath reports show a base case and a stressed scenario. There are default settings for each of these forecasts shown in the reports but clients can also customize these settings to show what they want in their specific report every period. The new feature that AMG has added is to supply the actual Excel worksheet populated with the bank’s own cashflows and data so that banks can perform unlimited stress test scenarios and also have the ability to do these in house. The liquidity forecast worksheet is downloadable directly from the BancPath.com secure web-based portal. Stress Test Worksheets AMG has a section in the report that is shown every period that stress tests deposit mix, deposit betas, deposit durations and prepayments on loans and time deposits. Over the last couple of years as interest rates have increased and deposit costs have risen, the beta assumptions that banks use for their non-maturing deposit cost modeling for changes in interest rates have come under increased scrutiny. The assumptions made to calculate the durations of these non-maturing deposits have come into question as well as deposits have left the banks. In response, AMG has again made available to its clients the actual Excel worksheets to clients so that banks can do unlimited stress tests in house. These worksheets for each client are also available for download on BancPath.com. Historical Core Deposit Study The historical core deposit study was also done in response to increased scrutiny on banks beta and duration assumptions on non-maturing deposits. This study shows how the banks betas have changed over the last five years for each deposit category and how these compare to the BancPath peer average. Also provided are deposit account balances as a % of earning assets and calculated durations over the same time period. As part of this study, AMG also includes a comparison of MMDA accounts and 6-month CD’s. This study looks at the rate and balance changes of these two products over the last 12 years (or as far back as AMG has data for each client). AMG does this because we believe that the depositor views MMDA and 6m CD’s as alternative investments, and when the differences in the rates paid between these two instruments becomes too great, the depositor will move from the less rate sensitive product (MMDA) to the more rate sensitive product (CD). Careful attention should be paid to this relationship to detect and prevent disintermediation between these product types. This divergence may also be a warning of similar movement from other non-maturing deposit products in the future. AMG has generally pegged this rate differential at 80 bps, however that can change depending on where we are in the rate cycle and from what prior level it occurs. Dynamic Balance Sheet Option One of the standard modeling assumptions made by ALM providers in the marketplace, as well as what is required by regulation, is that the balance sheet mix remains the same. For purposes of projecting net interest income, AMG now has a tool to project net interest income while changing the mix of the balance sheet. The change in the mix, done by either actual dollars or percent of balance, is assumed to occur straight line over the next 12 months. These balance sheet changes can be made right in the inputs in BancPath.com as the client submits regular periodic data. This allows bank managers to see how the net interest income is affected by changes in the mix of the balance sheet. Another standard modeling assumption is that for parallel shocks to interest rates, the shape of the yield curve remains the same in all scenarios up and down 500 basis points. In the infrequent case of today’s inverted yield curve, the assumption that the shape of today’s curve will remain the same in 500 basis point shocks, most would agree, is probably not the most realistic of assumptions. The BancPath system runs standardized non-parallel yield curve shifts to test the effects on net interest income and allows the user to input their own user yield curve to see the affects. The new Dynamic Balance Sheet Option also offers this functionality for the user to input their own yield curve along with the balance sheet mix changes to see what the overall affects are on the bank’s net interest income. As markets move and new issues arise for banks, AMG strives to provide clients with the tools and reports necessary to navigate these changes. Virtual Users Conference Coming in November AMG is planning on having a Virtual Users Conference (1 hour) in November so please look for an invite to this in the coming weeks. We welcome any ideas you have on topics you would like for us to cover during this conference so please feel free to send those over to us. For further information on our Asset / Liability Management Reporting and Consulting services or any of the other services provided by AMG, please feel free to reach out to your Capital Markets Group Investment Sales Representative. You may also contact AMG directly at 800-226-1923 or at AMG@CountryClubBank.com.  |
This information is intended for institutional investors only. The material provided in this document/presentation is for informational purposes only and is intended solely for private use. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instruments.
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