Asset/Liability

Glass City Federal Credit Union Effectively Manages ALM and Deposit Risk

The Challenge: Running ALM Model is Time Consuming

Glass City Federal Credit Union, with about $235 million in assets and between 24,000 and 25,000 members, faced a challenge that is common among smaller but growing credit unions.

Glass City Federal, located in Maumee, Ohio, a suburb of Toledo (aka “Glass City” for the glass manufacturers there), had neither the manpower nor the ability to continue dedicating time and resources to properly maintain an asset/liability management (ALM) model in-house. Executive Vice President David Kramb, who had been using Abrigo’s FARIN Foresight ALM model software to run the ALM model himself since the 1990s, recalls the eye-opening experience of attending a training session with other bank and credit union executives running ALM models at institutions. “You’ve got a bank in the room that might have two or three people attending this training and one person, their entire job is data manipulation within the model, while another person’s job was strictly running different scenarios, forecasting,” he said. “Here I am, a $225 to $235 million credit union, you have me doing all of that, plus all of the other duties.”

Kramb loved the muscle behind FARIN Foresight. Because he viewed the model as being so powerful, he wanted to make sure that he was using the model to its highest capacity and incorporating the right assumptions that Glass City Federal needed, without having the expertise of best practices on-hand.

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“You’ve got a bank in the room that might have two or three people attending this training and one person, their entire job is data manipulation within the model, while another person’s job was strictly running different scenarios, forecasting...”

David Kramb, EVP, Glass City Federal Credit Union

The Solution: Abrigo’s Asset/ Liability Management Advisory Services

Glass City Federal Credit Union chose to outsource the credit union’s ALM model, and when it came to deciding which firm to choose, there was no competition. It was Abrigo’s Asset/Liability Management Advisory Services, formerly FARIN. “The product was there and fabulous, but the people that were behind it made it an easy decision,” Kramb said.

Since outsourcing the ALM model about a year ago, Kramb says he spends less time manipulating data and more time diving in depth into the reports produced by Abrigo so that he can understand them better. “Many years ago, it seemed like I just wanted to get in there and produce the reports because it’s going to keep the regulator happy,” he says. “I certainly understood how our balance sheet fit together, but there wasn’t a whole lot of analytics going on. Certainly from a regulatory standpoint, as you grow and become more complex, it’s not just about producing reports for the regulator and saying, ‘Look, we’ve got no issues with interest rate shocks or liquidity.’ It’s understanding what’s happening behind those reports and then being able to do some what-ifs. Maybe you want a new product or service or another product line and you want to see how that’s going to affect everything.”

Now, he has more time to focus on data analytics to understand and manage risks better.

A Priceless Investment

“I am here to manage risk for the credit union, not to remove risk. And you have to be able to justify to your board of directors, to your member, to the regulator how much risk there is embedded in your balance sheet, and if there’s too much risk, how do you alleviate that, how do you manage that,” Kramb says.

“That’s what I’m getting with the model and the people behind the model. The ability to more efficiently manage risk and do it with a comfort level that I feel is not putting our credit union or members at risk. So that falls into the priceless category, right?”

Looking Ahead

In addition, Kramb has more time to take on another important task. “I have my eyes on retirement,” he says. “I worry about three to five years from now about who’s going to take the reins, and I need to be planning for that. Where we’re headed now is I want to teach one of my associates here in my accounting department to partake in some of this, to understand the model, read the output. I need to get someone rolling on that to have some additional expertise on this.”

With Kramb’s positive recommendations of Abrigo’s Asset/Liability Management Advisory Services, the process of using the model and Abrigo experts to bring his accounting colleague up to speed should be seamless.

“That’s what I’m getting with the model and the people behind the model. The ability to more efficiently manage risk and do it with a comfort level that I feel is not putting our credit union or members at risk. So that falls into the priceless category, right?”

David Kramb, EVP, Glass City Federal Credit Union

Minimizing Core Deposit Risk

Glass City Federal Credit Union, which opened in 1947 to serve employees of a glass manufacturer then decades later received a community charter encompassing four counties in Northwest Ohio, has also utilized Abrigo’s Core Deposit Advisory Services. “The [ALM] model uses certain generic assumptions and over the years, I’ve argued with regulators that I think ours [non-maturity deposits] had more value than what the model was indicating, but the regulator would say you need to price everything at par,” Kramb says. “I thought it was important to put our own data out there to show how it had acted over time.” The core deposit study from Abrigo confirmed Glass City Federal’s argument and provided more in-depth data than the credit union previously had. “It gives you a better comfort level as a financial institution to say we’re on track here, we’re modeling our own deposits.”

Top-Notch Expertise

What Kramb values most about Abrigo’s Asset/Liability Management Advisory Services is what he has always appreciated: the people.

“It’s nice to have that expertise looking over our shoulder – not telling us what to do, but making very, very good suggestions. People that see this very same data from different angles and from many different institutions. It’s nice to lean on them when they say, ‘You should be comfortable with what you’ve got or hey, be careful,’ and then to lean on the expertise of some folks … that have been in the industry for a long time to ask, ‘Any thoughts on what we should do?’”

“From liquidity to stress testing to interest rate shocks, that can all be done relatively easily, and by us kind of farming that out to [Abrigo] I know it’s being done properly and it’s not something I’ve got to sit down once a quarter and say, ‘How do I do that?’” Kramb says. “We’re taking advantage of the manpower and expertise within Abrigo and FARIN.”

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