Deposits & Loans Analytics

Behavior assumptions and forecasts for non-maturity deposits, time deposits and loan prepayments are critical inputs for accurate risk measurement and effective balance sheet management.  VBC offers a comprehensive suite of deposit and loan behavior analysis services that are both flexible and scalable in order to best meet your specific objectives, available data and budgets.

Whether your goals are to improve the quality and accuracy of ALM model inputs for regulatory compliance, to better understand potential concentration exposures within your deposit portfolio or to deploy fully segmented forecasts to support vintage, geographic or affiliate-based analyses, VBC will partner with you to deliver the most robust deposit behavior forecasts possible.

All VBC deposit and loan studies utilize industry-leading analytics and are fully transparent back to the underlying data.  Relationships between deposit and loan behaviors and interest rates or other economic conditions are clearly identified with “internal” assumptions and constraints kept to a minimum and always fully disclosed.  

  • Non-Maturity Deposits Study

    Non-maturity deposits (NMDs) are generally the most significant source of funding for financial institutions.  Understanding how deposit pricing responds to changes in interest rates and how depositor behaviors, either through attrition or balance changes, react to those changes is key to managing interest rate risk.  Similarly, sensitivity of deposit balances to other stressors such as changes in macroeconomic or local market conditions are vital to identifying and managing liquidity risks.

    Accurate repricing and deposit retention forecasts for regulatory IRR measurement are the foundation of all VBC non-maturity deposit analysis and include statistical analysis and forecasting of these behaviors across a range of rate shock scenarios.

    Our analyses can be performed on account-level or aggregated, summary-level data, and forecasts can be provided in a wide range of formats for integration into any ALM model.

    Beyond the regulatory focus of our Basic NMD Analysis service, our Advanced and Premier service levels expand the scope of assessment and forecasting flexibility to include many additional data-driven and defensible assessments including:

    • Funding concentration and volatile funding assessments including surge deposits
    • User-defined rate scenario forecasts such as ramps, twists, and fully user-defined
    • Detailed analytics to address transition related impacts of acquisitions or other unique events and appropriately incorporate them into forecasts
    • Inclusion of systemic and idiosyncratic economic variables for more robust liquidity stress test assumptions
    • Segment-specific forecasting 

  • Time Deposits Study

    Time deposits, such as CD’s or share certificates are another important component of balance sheet funding.  While contractual maturities are known for these deposits, early withdrawals need to be considered, particularly if penalties are minimal.  Understanding the magnitude of new volume pricing practices relative to market rate changes is critical to ensuring accurate new volume rate forecasts in ALM modeling.

    A VBC time deposit study is fully customizable and can be oriented to focus only on the pricing or early withdrawal dimension or expanded to include both.  When paired with a VBC Non-Maturity Deposit Study, cross-product relationships are explored to identify and quantify the magnitude of deposit transfers from time to non-maturity and vice versa.

  • Non-Maturity Deposit Analysis Benchmarking

    Our non-maturity deposit analysis benchmarking service provides a cost-effective complement to your current NMD forecasts.  Benchmark results can increase confidence in your existing ALM inputs by confirming the direction and magnitude of repricing and retention behaviors through an independent third-party assessment as well as offer additional perspective on behavior sensitivities across a range of interest rate environments not captured in your internal analyses.

  • Loan Prepayments Study

    Unscheduled repayments of outstanding loans create both opportunities and risks to the overall balance sheet management process.  Additional cash flows provide liquidity, but having to reinvest those finds into potentially lower earning assets create both NII and Eve/NEV IRR exposures.

    In order to effectively manage these exposures, it is critical to understand the magnitude and impacts of both whole and partial prepayments across the range of loan types, payment types, interest rate environments and other factors that influence prepayment behaviors.

    VBC loan prepayment studies are customizable based on project scope and the available data history.  At a minimum, the institution’s prepayment experience (whole and partial) is quantified and calibrated across required regulatory interest rate shock scenarios with assessments of the effects of:

    • Loan type
    • Fixed vs. non-fixed 
    • Coupon to market rate spread
    • Age

    From this foundation, the study can be expanded to assess and quantify other influences such as prepayment penalties or macroeconomic variables.