The Asset/Liability Management (ALM) Policy will assist the board in their planning and provide guidance for the day-to-day operating decisions that need to be made in the financial management area. This Policy outlines the working relationship between the Board, ALM Committee, and Management and it requires the submission of a Credit Union Business Plan and Annual Budget.

The overall financial objective of the Credit Union is to remain profitable. To achieve profitability, certain financial practices must be maintained to weather stresses caused by market rate fluctuations.

1. Asset/Liability Management (ALM) Committee.
1. Composition: the Board will establish an ALM Committee consisting of one member of Credit Union management and two board members, one of which will be either the Board Vice President or the Treasurer who will act as its chairperson.
2. Meetings: the committee will meet or confer by phone as often as required and will report to the Board of Directors at its regular meeting.
3. Duties: the committee will:
1. Review dividend rates and terms offered on share certificates and make changes when necessary based on market conditions and Credit Union need.
2. Review loan rates, charges, and terms offered on loans and make changes as often as necessary based on market conditions and Credit Union need.
3. Recommend to the Board a rate of dividends to be accrued monthly on share and share draft accounts prior to the quarterly rate declaration.
4. Review the Business Plan and Annual Budget and identify those practices, which may cause conflict with asset/liability management and with the Board's goals and objectives.
5. Monitor the GAP Analysis position to analyze rate sensitive assets and liabilities.
6. Monitor the Credit Union's total reserve position and make recommendations to the Board for adjustments.
7. Monitor the Credit Union's capital growth and net capital-to-assets ratios and make recommendations to the Board should these ratios fall below Business Plan goals and objectives.
8. Recommend to the Board any action plans with specific time frames and persons responsible.

2. Business Plan.
1. Management will develop for ALM Committee recommendation and for Board approval a business plan that addresses financial objectives with regard to assets, loans, deposits, equity and income as well as financial and service products.
2. The plan will cover an extended period of time, usually 3-5 years.
3. Management will submit to the Board at least quarterly a "goals and objectives" report that will provide an on-going monitor toward reaching the financial and other targets.
4. The plan may be updated or totally revised from time to time as needed.

3. Annual Budget.
1. Management shall produce an annual budget for Board approval.
2. The budget will state what assumptions were used and shall be in similar format to the monthly financial statements.
3. The budget shall tie into the Business Plan's financial objectives for that particular year; however, any discrepancies to the Business Plan objectives will be disclosed as part of the budget.
4. The budget will be included in the income statement of the Board's monthly financial reports.
5. The budget may be updated from time to time as needed.

1. The Board intends to achieve membership satisfaction with financial services offered through the operation of a sound and viable credit union. Those financial services will offer competitive terms and rates while posing minimum risk to the corporate soundness of the credit union.

2. Management, the ALM Committee and the Board will use both liquidity and dividend/interest rates to position the Credit Union at the desired goal or objective stated in the budget and/or business plan. Should the Credit Union not reach the appointed goals or objectives, the Board will determine if certain steps must be taken to correct the shortcoming(s). It is recognized that short-term trends may not be deemed critical, but will serve as an "alarm" to merit monitoring only.

3. It shall be an on-going ALM objective to equalize the rates and terms of the credit union's rate sensitive assets and liabilities. That is, the dollar difference between the total rate sensitive assets (loans and investments) less the total rate sensitive liabilities (market sensitive deposits and borrowings) should be equal to zero. However, it is further realized that in order for the Credit Union to remain competitive, the Credit Union's liabilities (members' share certificates) will have terms much shorter than the Credit Union's assets (longer term loans). That is, the maximum share certificate term is 3 years, but loan terms are often 5 & 6 years for vehicle secured and 8, 15 & 30 years for mortgage secured loans.

4. A review will be made at least monthly or as often as required to ensure sufficient liquidity (cash) is available to fund loan and deposit withdrawal requirements. The credit union will adjust its balance sheet structure when required to ensure that an adequate spread is available to maintain a sound equity base and to offer a competitive dividend rate to its members.

 

Approved February 28, 1990
Revised July 21, 1994
Reviewed April 18, 1996
Reviewed August 20, 1998
Reviewed August 26, 1999
** Revised September 24, 2002
Reviewed July 24, 2003
Reviewed March 16, 2005