Teachers Federal Credit Union Builds a Robust Credit and Treasury
Function Enabled by Moody’s Analytics
BackgroundIn early 2020, financial institutions were facing
uncertainty about how the world would manage throughthe economic complexities resulting from the pandemic
and its impacts on balance sheet management. In
particular, financial institutions needed to rapidly adjust
their reserves in light of the deteriorating economic
outlook, the pandemic’s effects, and government initiatives like the paycheck protection program (PPP).
Additionally, firms were re-evaluating the pandemic’s effects on net interest margins, liquidity, and prepayments.
While Moody’s Analytics was helping Teachers Federal Credit Union (TFCU) prepare for the Current Expected
Credit Loss (CECL) accounting standard and to bring asset/liability management in-house, TCFU considered
the unprecedented economic situation and took the opportunity to also calibrate a “q-factor” to apply to theinstitution’s allowances.

Challenge“TFCU’s allowance model was overpredicting how much money the firm should reserve for potential loan losses,and provided no mechanism to adjust for changes in the pandemic’s impact, or the government’s response to thepandemic. This was inappropriately creating headwinds to both their lending, and customer expansion strategies,”
comments Mack Ochs, Director, Moody’s Analytics. “It did not matter what scenario their team was evaluatingor where TFCU was in the credit cycle, their allowance model produced the same result. With the different
government programs available and the expected credit deterioration, TFCU needed to adjust their allowanceoutside of what their model was stating. They needed to feel more comfortable in the uncertain economic
environment and lay the groundwork for more granular credit models and economic forecasts.”

How Moody’s Helped
Moody’s worked with TFCU to identify solutions from the Risk & Finance Suite to help create a fully integrated
treasury and credit risk management platform. The full solution of ImpairmentStudio for CECL, ALM US for
asset & liability management, Portfolio Analyzer, consumer credit models, the economic forecast suite, and anadvisory services project led to the expansion of a full,in-house balance sheet management initiative that is
enabling Teachers to grow in a risk-controlled fashion whileenhancing profitability.
The project implementation was well timed with Teacher’s
strategic data management initiative. The monthly
CECL process within Impairment Studio is streamlinedwith automated data files eliminating the need for any
manual data loading, or remediation, allowing the team to dedicate their time to analyzing the results using thepre-built standard reports, which are easily accessible from the application. This enables them to gain a better
understanding of the credit risk of their portfolios.
With the addition of MA’s Portfolio Analyzer models, a series of asset class-specific models that generate loanlevel probabilities and defaults, TFCU generates a host of enhanced credit analytics, including risk-based loanpricing, which in turn has contributed to significant improvements in the risk-adjusted returns on capital in theloan portfolio.
Finally, providing support for complex loan and deposit behavior, MA’s ALM US solution marries detailed analytics
with strategic planning, providing the transparency needed to drill into details to make decisions with confidence.
Moody’s tools are the foundation of Teachers’ robust risk-based pricing discipline that has been essential inmanaging capital in volatile markets, limiting risk and maximizing profitability.
“Best practices from this engagement with TFCU
demonstrate the value of client interaction,” says Irina
Baron, Senior Director, Customer Success Management,
MA. “We had one point of contact between MA and TFCU
overseeing the entire project from implementation throughadoption, which enabled cohesive collaboration and led toa successful engagement, supporting further opportunities.
For example, having the TFCU team implement efficientchange management practices from the beginning, suchas forming a permanent team dedicated to CECL, yielded
successful results in the centralization of information and continuity of engagement across Impairment andALM teams.”

MOODY’S ANALYTICS TEACHERS FEDERAL CREDIT UNION CASE STUDY: A CONSISTENT VIEW OF RISKResults“We built Treasury at Teachers, which includes teams torun ALM, CECL, Capital Planning, Stress Testing, and muchmore,” comments Denise McGlone, CFO of Teachers
Federal Credit Union. “We viewed Moody’s as a valued
partner since we started the advisory engagement projectin 2020. We look forward to continued success together.”As the credit union prepares to cross the $10B mark andexpands its footprint beyond the NY metro area, TFCU
continues to streamline its balance sheet management process with MA through an integrated network ofanalytics covering credit loss modeling, stress testing, balance sheet forecasting, and liquidity and interest raterisk analysis. TCFU’s use of Moody’s Finance Suite enabled them to build a fully integrated treasury and credit riskmanagement platform. They are able to leverage data, analytics and solutions for a variety of purposes, all with aconsistent view of risk management in one placewww.
For more information on Moody’s Analytics ALM US Solution please visit https://moodysanalytics.com/alm-us
For CECL please visit https://www.moodysanalytics.com/microsites/cecl-solutions
For Portfolio Analyzer please visit https://www.moodysanalytics.com/product-list/portfolio-analyzer-pa

MOODY’S ANALYTICS TEACHERS FEDERAL CREDIT UNION CASE STUDY: A CONSISTENT VIEW OF RISK

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