A powerful solution
For community banks and credit unions, effectively managing risk is critical – but maintaining an in-house ALM function can be costly and resource-intensive. Empyrean’s Outsourced ALM services deliver powerful risk analytics through our industry-leading modeling engine, while offering unmatched flexibility to scale and adapt as your needs evolve.
A one-stop shop for risk and compliance
The risk and compliance burdens on community institutions are often similar to those of institutions much larger in size. However, complying with those demands is a challenge given the capacity of your resources. As such, you can’t afford to spend time engaging with numerous vendors for various elements of your balance sheet management requirements.
That’s where we come in. Empyrean offers a comprehensive menu of services that can satisfy all elements of best-practice balance sheet management.
A partner to grow and evolve with
As your institution continues to grow in size, complexity and/or personnel capacity, our service enables you to take on more of the modeling and analysis internally. Empyrean can simply provide access to your model on the Empyrean Cloud®, or enable you to take it in-house at your discretion.
Aligned with your interests
With Empyrean, balance sheet management is our business. Our sole mission is to deliver quality services that result in such a high level of customer satisfaction that you’re willing to mention Empyrean to your peers.
That’s all the incentive we need.
A comprehensive set of services for risk and balance sheet management
Best-practice Balance Sheet Risk and Compliance
Managing a balance sheet in today’s complex, fast-paced environment requires bringing together risk management, performance measurement and regulatory compliance into a single coherent framework. Confidently planning the balance sheet and forecasting income enables an institution to set their strategy, define their goals, and assess their success and effectiveness. Utilizing those forecasts to establish a modern management process for interest rate risk and liquidity risk is critical to ensuring the safety and soundness of the institution. Succinct analysis and digestible reporting are necessary to comply with regulatory demands and to go beyond simply identifying and mitigating risk to using it as a tool to build stable, long-term earnings for the institution.
IRR/ALМ
Delivering a regulatory approved IRR/ALCO reporting package modeling both a static/flat balance sheet and multiple client-specified balance sheet projections using a full complement of interest rate environments (including shocks, ramps, flatteners, steepeners, twists, etc…) relevant to current conditions.
Liquidity Stress Testing
An extension of your ALM simulations specifically stressing the various sources and uses of funds under adverse conditions to analyze its impacts, assess the effectiveness and viability of your balance sheet strategy, evolve your contingency funding plan, and satisfy regulatory demands.
Balance Sheet Risk Profile Manager
An extension of your ALM simulations giving you the ability to run your own simple portfolio what-if scenarios to instantaneously see how different strategies affect the institution’s risk profile.
Assumption Stress Tests
A stress of each individual assumption (prepayments, rate betas, decay rates, surge volumes and pricing spreads) and model driver to assess their impact, illustrate the institution’s sensitivity to changes in each variable and to comply with such regulatory requirements.
Model Backtest
An annual back-test measuring the ability of the model and modeling assumptions to forecast income for a known set of input metrics and key rates that actually occurred over the first year of forward income simulation.
CECL Support
A loan or portfolio report on the various cash flow characteristics (WAL, etc…) necessary for populating a CECL solution.
Invaluable Insight into Your Products and Customers
Understanding your customers behaviors is the key to managing risk effectively while maintaining profitability and performance and successfully attracting and retaining the right customers in competitive markets. Your customer’s behaviors are the most critical assumptions driving your risk and performance measurement processes. Maintaining the accuracy of those assumptions is critical, as even small adjustments could have a dramatic effect on the profile of your institution. The best assumptions – both in practice and as required by the regulators – are those based on the individual institution’s experience – their customers, their markets, their business practices.
Deposit Study
A continually updated, transparent and defensible approach for producing the most impactful assumptions (deposit rate betas, decay rates and balance volatility) on interest rate and liquidity risk. Produced by leveraging the most reliable informational source possible…..your institution’s own data.
Prepayment Study
A continually updated, transparent and defensible approach for producing appropriate prepayment speeds for each institution for all of their lending portfolios. Produced by layering on behavioral analytics to years worth of historical portfolio data, all from the most reliable source possible…your institution’s own data.
Portfolio Insights
A curated report package illustrating the past and upcoming dynamics of the lending and deposit portfolios, allowing you to answer the critical questions driving profitability:
- How do the portfolios look today across products, lines of business, branch, officer, etc… and how have they trended over time?
- How profitable are the various business lines, officers, branches, products, segments, etc…today and how has profitability trended over time?
- What is happening to the balance sheet, each month, and on an on-going basis trending over time?
- Who is producing what? Where? At what rate? On what terms?
- Where do I gather the critical assumptions for new business pricing, product terms and portfolio allocation necessary for accurate balance sheet planning?
Advisory from Actual Practitioners
We realize that not every management team has a background in risk management. And even the ones that do oftentimes don’t have the time to meaningfully contribute to the modeling process and/or examine every report and analyze every change in a ratio or metric. However, effective risk management and balance sheet strategy should be rooted in the modeling and scenario analysis inherent in ALM. Having a seasoned risk practitioner on staff who can ensure model soundness, interpret results, filter out items of importance, facilitate discussion on their impacts, help craft strategy and communicate with regulators shouldn’t be a luxury, it’s essential.
Advisory Services
Empyrean doesn’t stop with the delivery of a report package, as we can bring our seasoned risk practitioners with decades of balance sheet management experience to your table to participate in the process:
- Working with you to more appropriately define the assumptions used in your modeling process.
- Interpreting your simulation results and reports and curating a tailored, executive presentation focused on changes and trends in your balance sheet and risk profile as well as potential warning signs for the future
- Presenting to ALCO on a quarterly basis on your interest rate and liquidity risk exposure and its impact on capital.
- Advising on ALCO policy, limits and process and recommending changes where necessary
- Providing general strategy recommendations to manage, limit and mitigate risk
- Assisting in regulatory examination preparation
- Educating senior management and board members on risk and risk mitigation
