Pub. 13 2023-2024 Issue 5

“Over my 16-year tenure with Bankers’ Bank of the West, every minute of our work has been dedicated to bringing solid expertise, services, and products to ensure community banks sustain a competitive edge. We’ve certainly grown strong as partners, looking out for each other—and we look forward to continuing that tradition.” Bankers’ Bank of the West LOAN PARTICIPATIONS|MERCHANT SERVICES|ATM DEBIT|WIRES bbwest.com | 800-873-4722 www.bbwest.com President and CEO Bill Mitchell We Champion Community Banking Member FDIC ALM Information Systems addresses Management Information Systems and information availability, accuracy, adequacy and expediency. Information is the key to ALM strength. ALM organization requires a strong commitment from the board and senior management to integrate basic operations and strategic decision making within risk management. The ALCO decision-making unit monitors market risk levels compared to boardset risk limits, articulates the current interest rate view and view on the future direction of interest rate movements to strategize for future business opportunities, and reviews the results of and progress in implementation of the decisions made. Lastly, the ALM process encompasses a scope of liquidity risk management, management of market risks, trading risk management, funding and capital planning, and profit-planning and growth projection. While the above is not all-encompassing, it does assist financial institutions in knowing that their ALM foundation is robust and agile to respond to evolving needs, and that it is modeling the balance sheet, projecting net interest income and economic value of equity, all while performing scenario analysis and stress testing to assess the impact of key performance indicators. This means also hiring a quality ALM professional who understands the need to replicate the portfolio from a sensitivity point of view when modeling a balance sheet or replicating cash flow, including complex structured products and embedded optionality. It requires accuracy and reliability to demonstrate what is happening right now within a portfolio. As stress testing and scenario analysis demands continue, banks need to be able to respond consistently to multiple scenarios via their credit stress models. It should account for evolving requirements, meaning the bank should be able to run a scenario analysis, including stress testing non-interestbearing checking accounts if there is a move to a higher interest rate. Financial institutions need to recognize that change is necessary for how they tackle managing liquidity and interest rate risks. ALM and liquidity are two essential parts of the bank’s overall model risk management structure. In addition, ensure the board has at least one director with a solid understanding of balance-sheet management concepts; be proactive in identifying risks and updating policies and procedures before implementing new products or activities; and reevaluate and communicate guidance and risk tolerances to bank personnel. With the economic landscape, particularly that of community banks changing significantly, it directly correlates to a heightened need for attention to ALM risk management strategies and processes. Elizabeth is the Vice President of Compliance Operations and Deputy General Counsel at Compliance Alliance. As the Vice President of Compliance Operations, Elizabeth oversees C/A’s Products and Services and plays an important part in all operational areas of C/A. Colorado Banker 6

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