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Deere Employees Credit Union Improves ALM Forecasts With Core Deposit Analysis

The Challenge: Credit Union's Growth Highlights Importance of ALM

Predicting depositor behavior can be challenging. A credit union might expect members utilizing nonmaturity deposit accounts to behave one way when interest rates rise, but they may in fact behave quite differently. When that happens, a credit union’s ability to forecast capital and earnings is made more difficult.

Deere Employees Credit Union is an 84-year-old credit union that first opened in Moline, Illinois, to serve the workers and their families of Deere & Co. It now serves some 60,000 members who are current or retired Deere & Co. employees or family members, or employees of Deere & Co. contractors, wholly owned subsidiaries, joint
ventures, and John Deere Dealers. Managing over $1 billion in assets, about 25 branches, and 110 employees, the credit union is growing very quickly, so it’s especially important to have a good handle on risk and new growth opportunities.

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“We can model how we think [financial instruments] have done, but then it’s good to see ... data and then to be able to build that into the model. It allows us to have more accurate forecasting.”

Heidi Wulf, VP, Accounting & Finance

The Solution: Abrigo’s Core Deposit Analysis

Heidi Wulf, Vice President of Accounting & Finance, says an annual Core Deposit Analysis from Abrigo, formerly Farin, helps improve the credit union’s Asset Liability Management forecasting by giving it accurate data on how various financial instruments have performed historically.

“In my experience, I’ve found it’s really good to have the information because when you’re modeling any sort of product in the [ALM] model, it’s a good idea to know how those instruments have performed historically,” Wulf says. “We can model how we think they’ve done, but then it’s good to see what [the advisors at Abrigo] come up with and nice to have that data and then to be able to build that into the model. It allows us to have more accurate forecasting.”
For example, Wulf says, “We thought maybe some of our deposit accounts were volatile to rate changes.” Through the Abrigo Core Deposit Analysis, however, “We were able to see they were not as sensitive to rate changes, so that allows us to slow down that decay and runoff, which allow us to forecast better what we can truly expect in one of those environments.”

While some financial institutions only update their Core Deposit Analysis every couple of years, Deere Employees Credit Union conducts one annually. “It’s nice to have that information updated annually and see if there have been any changes, especially as quickly as we’ve been growing,” Wulf says. One advantage of an annual study is that it allows the credit union to see how newer accounts are behaving, she adds.

Wulf says Abrigo’s advisory team also provided the Core Deposit Analysis regularly at her previous employer, a bank, so it’s been an easy transition when she joined Deere Employees Credit Union nearly two years ago. And preparing for the Core Deposit Analysis requires no work on Wulf’s part, she says. Abrigo pulls the necessary information to run the Core Deposit Study reports out of data already provided by the credit union each month for the ALM model, which is managed by Abrigo. “We get a final report that shows the information on all of the product types and the suggested changes to the system, and then we’ll go through with our analyst … and they’ll help us decide what settings in the system to update and they take care of those.”

Guidance, Understanding

Deere Employees Credit Union has worked frequently with Abrigo Consultant Terri Grams and Senior Consultant Urum Urumoglu, and Wulf likes the continuity of working with Abrigo’s advisors. “It’s nice just having someone that’s familiar with your information and able to guide you through the process from start to finish, to make sure you understand the report when you get it, and to make sure that it gets built into the model properly.”

Urum has even helped provide training to Deere Employees Credit Union’s board of directors on ALCO issues. “It’s reassuring having that familiar face as well,” Wulf says. “He understands what we’re doing and knows what we’ve done. It all kind of flows together.”

“[Abrigo’s Senior Consultant] understands what we’re doing and knows what we’ve done. It all kind of flows together.”

Leverage the Value of Your Non Maturity Deposits

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