WASHINGTON – A climb in investment yield has helped to boost credit unions’ return on assets. This, according to early third quarter credit union data from the First Look Program of Callahan & Associates, Inc. Data was collected from 814 sample credit unions and include 14 of the top 25 largest credit unions in total assets. These yields rose because the Federal Reserve raised the overnight fed fund rate by 75 basis points over the past several months. In addition, cost of funds stayed stagnant at 1.50%, buoying the rise in ROA, according to Callahan. “ROA is up 10 basis points, due in part to the reluctance of credit unions to increase their dividends,” said Jay Johnson, executive vice president at Callahan. “However, flat dividend rates are leading to a decline in new shares.” The .08% quarterly share growth of the participating credit unions is not keeping pace with loan growth. The result is tightened liquidity, declining balances in investment portfolios, and an increase in borrowings, Callahan reported. Other newly-released data indicates that loan growth remained strong for the quarter at 3.6%, fueled by real estate loan originations, resulting in 5.6% growth in real estate loans outstanding. Auto loans also helped boost loan growth by increasing 1.6%. “It appears that loan growth will continue its momentum through year-end, but it’s only a matter of time until share rates rise, thus tightening the net interest margin and making it more challenging to increase ROA,” Johnson said.

Complete your profile to continue reading and get FREE access to CUTimes.com, part of your ALM digital membership.

Your access to unlimited CUTimes.com content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Critical CUTimes.com information including comprehensive product and service provider listings via the Marketplace Directory, CU Careers, resources from industry leaders, webcasts, and breaking news, analysis and more with our informative Newsletters.
  • Exclusive discounts on ALM and CU Times events.
  • Access to other award-winning ALM websites including Law.com and GlobeSt.com.

Already have an account?

 

Credit Union Times

Join Credit Union Times

Don’t miss crucial strategic and tactical information necessary to run your institution and better serve your members. Join Credit Union Times now!

  • Free unlimited access to Credit Union Times' trusted and independent team of experts for extensive industry news, conference coverage, people features, statistical analysis, and regulation and technology updates.
  • Exclusive discounts on ALM and Credit Union Times events.
  • Access to other award-winning ALM websites including TreasuryandRisk.com and Law.com.

Already have an account? Sign In Now
Join Credit Union Times

Copyright © 2022 ALM Global, LLC. All Rights Reserved.