Is NII better than NEV?
No, neither is better than the other. They are just different ways of measuring interest rate risk. NII measures the changes in expected net interest income given changes in interest rates. NII is measured over a period of time (12 months or more), and includes the credit union’s own growth projections in assets and liabilities. These growth projections can be as detailed as your credit union’s ALM model allows. These growth projections must have a direct relationship to your credit union’s organizational goals (i.e. loan and share growth). NEV measures the market value of your credit union’s balance sheet based on today’s book of business. Technically, NEV is a calculation of the discounted present value of all your balance sheet’s future cash flows. It does not address any balance sheet growth assumptions, nor does it consider the expense structure of your credit union and how this impacts your credit union’s ability to generate future net income. These are inherent flaws in NEV anal
