ARLINGTON, Va. – The pace at which credit unions sold their card portfolios and entered into agent relationships with their purchasers started out strong in 2005 but slowed significantly over the course of the year. Rising interest rates provided part of the reason for the slowdown along with the relatively inflexible nature of the card portfolio asset, brokers and purchasers estimated. In 2004, roughly 65 credit unions sold their card portfolios to bank issuers and entered into agent relationships with them. In the first quarter of 2005, roughly 21 more credit unions added their names to the list. But as the year went on, the numbers began to slow as interest rates rose. Even though the second quarter 2005 saw portfolio sales increase 35% over where they had been in the second quarter of 2004, according to data supplied by NCUA and analyzed by noted brokerage Asset Exchange, they were nonetheless starting to drop. Brookwood Capital, another card brokerage firm pointed out that the 2005 pace slowed in the second quarter. Only 17 credit unions sold their card portfolios in the second quarter of this year compared to 22 portfolios sold in the first quarter, according to its analysis of NCUA data. Since NCUA has not yet released credit union data from the third or fourth quarter in order to let credit unions affected by the hurricanes gather their data, there are no hard numbers about the pace of 2005 sales from the second half of the year. Tim Kolk, managing partner of Brookwood Capital, a brokerage for credit union card portfolio, explained in September that the rising interest rate market may have been undermining some of the profitability credit union card portfolios have generally held. "A quality buyer is not going to want to pick up a card portfolio and immediately re-price it because that's bad for the credit union and ultimately counter-productive," Kolk explained. "But that can mean that some CU portfolios aren't as good a deal now as they once were." The other part of the card portfolio purchase, the opportunity to market cards to the often 75% or 80% of the credit union's membership which has not taken card before, still represents an opportunity, Kolk said. But it will likely be between two and four years before a new issuer will realize a full return from that market, he said. Kolk said that the firm was still seeing credit unions that were at least thinking of selling their portfolios, but that there was a marked reluctance among the buyer to offer the same premium. "There is still interest in the portfolios," Kolk said, "just not as much interest in spending quite as much for them." Willie Koo, CEO of Asset Exchange, the leading broker of credit union card portfolios, agreed with Kolk and said in September that while he lacked the statistics to look at the overall trend, over the last couple of months the firm had noticed premiums dipping. "The problem is really that credit unions have fixed rate cards or a fixed rate portfolio and that can be hard to change in this environment," Koo said. [email protected]