June 2024

A Message from the President

In this edition of the QuantyPhi Quarterly, we highlight key services especially relevant for credit unions right now, as well as shine a spotlight on our dedicated team and showcase upcoming events.

The economic landscape of 2024 continues to present a unique set of challenges, with credit unions navigating the complexities of a persistently inverted yield curve and the corresponding operating and liquidity stresses that come with it. As we explore strategies to properly measure and mitigate these risks, it is crucial to understand the impact of interest rates and broader economic factors on credit union balance sheets and the importance of robust risk management practices in sustaining financial stability.

QuantyPhi stands ready to be your trusted partner through the suite of beneficial products and services we offer, with the singular focus on helping you achieve success. As a balance sheet optimization CUSO dedicated solely to credit unions, we understand the unique struggles facing our industry and specialize in investment, ALM, and liquidity solutions tailored just for you.

Adam Stone
President

Liquidity Framework Review

Liquidity Framework Review strengthens your liquidity risk management.
Liquidity continues to be a top concern for credit union leaders and examiners. QuantyPhi is here to support credit unions with our Liquidity Framework Review service. Through our tailored Liquidity Framework Review, we take a deep dive into the core of your internal liquidity program, scrutinizing its resilience and efficacy. We meticulously analyze your liquidity risk management framework and evaluate the precision of your liquidity measurement and monitoring tools. The Liquidity Framework Review ensures that your leadership gains real-time insights into your liquidity status and any emerging risks on the horizon.

Liquidity Framework Review

Drive better strategies with QuantyPhi’s advanced Mortgage Servicing Rights Valuation.

Mortgage servicing rights (MSR) are an arrangement where loan originators sell mortgage loans and retain the administrative duties and tasks associated with the loans, as a revenue stream. This allows the financial institution to focus more resources on the business of origination and disbursing new mortgage loans. QuantyPhi has built a sophisticated valuation model that ensures accurate reporting of MSR assets on your credit union’s call report, considering the impact of changing interest rates on prepayment speeds and income.

To highlight the effectiveness of QuantyPhi’s MSR model and prove the benefits of viewing MSR valuations with an ALM and interest rate risk focus, a detailed case study was conducted. The case study is based on characteristics of actual credit union real estate loans sold portfolios and spans multiple years and significant changes in market interest rates.

Read the Whitepaper

Market Update

The “higher for longer” rate path signals increased importance on keeping liquidity front and center.
By: Danny McIntyre, Vice President Investment Services
Market sentiment continued to embrace the “higher for longer” interest rate path as inflation remains sticky and the Fed follows the economic data waiting for confidence they can pivot without reigniting price pressures. Rates climbed 25 to 30 basis points in the belly of the curve since quarter end while short rates edged 4 to 10 basis points higher. Pricing in the Fed Funds futures market now points to a Fed rate cut in September or December this year with another cut in January 2025. Looking back to year end 2023, market sentiment called for an initial rate cut in March 2024 and a total of 7 rate cuts through January 2025.

The “higher for longer” rate path signals increased importance on keeping liquidity front and center. As the Fed monitors economic data waiting for things to fall into place, it is unlikely we will see the massive liquidity inflow previously forecast. With a very interesting presidential election heating up, question marks abound. Credit unions will need to be prepared for all scenarios. If the Fed stays on the sidelines, current liquidity needs will have to be met in a tighter market. On the other hand, if the economy reignites, additional liquidity needs may arise to fund the loan machine.

As followers of our commentaries are aware, we have consistently emphasized the importance of liquidity management. For any credit union who would like some assistance on this front, explore QuantyPhi’s Liquidity Framework Review. It addresses all aspects of liquidity management to let you confidently move forward. As a side benefit, it will have you ready to make your examiner happy, maybe even smile.

We stand ready to help. Let us know if you would like to see market commentary when it comes out. We can keep you updated on market sentiment by showing projected interest rate paths based on pricing in the Fed Funds futures market as well as the forward curve. We also highlight this information in our monthly Investment 201 webinars. Let your financial strategist know if you would like to be included or check our website for dates and times.

Market Update and Security Offerings Email
This weekly communication will provide an update on key market rates, as well as provide indicated offering levels for Treasuries, Agencies, Mortgage-Backed Securities, and select other investment types available through Corporate Central’s Broker/Dealer program. It will include robust fundamental analysis and total return analytics to help credit union members identify characteristics in the market sectors that meet their needs.

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Financial Reads

Are you looking for some good reading that might help you at work too?

Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
This is an interesting read from a money manager that will challenge the way you think about business and the world. Nassim Nicholas Taleb investigates the role of luck, probability, and human error in the process of making money decisions.

The Big Short: Inside the Doomsday Machine
Author, Michael Lewis, brings the 2000’s mortgage market to life in his New York Times bestseller. Dive into the real story of the market crash and meet the characters and institutions that made it all happen.

Getting to Know Your CUSO Team

Wade draws on a wealth of knowledge and expertise to help credit unions.

On February 28, Wade Cooper, Financial Strategist, discussed the value of small credit unions to communities and the importance of them to the credit union system at Generations Credit Union’s 80th Annual Meeting. Karen Jurasek, President/CEO of Generations Credit Union, invited Wade to present and join in the celebration of 80 years of service to the Rockford, IL community.

Wade Cooper joined Corporate Central as a Financial Strategist in April 2019. His primary role is to help credit unions optimize and build a balance sheet that maximizes performance and allows them to better serve their members. Wade helps members learn about what their balance sheet needs are from an ALM, risk, liquidity, and investment perspective.

He brings a wealth of experience from his previous roles including working for the Illinois State Treasurer, natural person credit unions, and as a Supervisor of the Credit Union Section for the State of Illinois where he led a team of 14 examiners and 3 office staff. Wade has a bachelor's degree from Iowa State University in Ames, IA, and a master's degree from Governors State University in University Park, IL.

In his free time, Wade enjoys coaching his son’s travel baseball team and Little League baseball team.

Connect with Wade on LinkedIn.

Events
Investments 201 | Webinar Series

Join us for the Investments 201 Webinar Series, a monthly deep dive into the world of balance sheet and investment portfolio management. Webinars will be held on the third Thursday of each month at 2:00 p.m. CT for 45-minutes. These sessions will be tailored for managers seeking valuable insights to optimize their investment strategies.

Session highlights:

Market sentiment analysis: get a comprehensive overview of the current market sentiment. Our strategists will analyze key factors influencing the financial landscape, providing you with valuable insights into market trends.
Implied interest rate paths: understand the implied interest rate paths and their impact on your investment decisions. We will delve into the factors shaping interest rates, helping you stay ahead of market dynamics.
Spotlight on investment products: each month we will shine a spotlight on specific investment products that hold significant value in the current market. Explore opportunities and gain a deeper understanding of products that align with your portfolio.
Portfolio management strategies: navigate the complexities of portfolio management with our expert guidance. Discover effective strategies to optimize your investment portfolio, ensuring a balanced and resilient approach.

Secure your spot now to enhance your investment knowledge and stay informed about the latest market trends.

2024 Economic Outlook Conference
Thursday, September 12, 2024
Register today for Corporate Central's 2024 Economic Outlook Conference. Attendees will learn valuable information about the current and upcoming economic environment from a diverse speaker lineup that will assist with your 2025 planning efforts. QuantyPhi is a proud sponsor of the Economic Outlook Conference. The event is being hosted at the Ingleside Hotel in Pewaukee, WI. Corporate Central has reserved a block of rooms for attendees. Hotel reservations can be made using the link on the event page.

Spotlight on SimpliCD

SimpliCD makes it easy to turn your excess liquidity into a high yielding certificate of deposit portfolio.

With SimpliCD, your credit union can:

Purchase multiple CDs in a single transaction with no fees
Eliminate the need for multiple wire transfers - Corporate Central makes the transfers for you
Receive one consolidated interest payment to your Corporate Central account

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