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WASHINGTON and SAN BERNARDINO, Calif. — Some credit unions have been able to maintain high net interest margins despite a flattened yield curve that has others looking to non-interest income to compensate. “When net interest margin is squeezed then ROA will go down unless the credit unions do something to make a difference,” CUNA Chief Economist Bill Hampel said. There are three things that drive return on assets, he said: NIM, operating expenses, and fees. To deal with the flattened yield curve of the last 18 months that is compressing NIM, credit unions must either lower expenses or increase non-interest income.

“Heightened competition has created a drop from 400 to 360 [basis points in net interest margin across U.S. credit unions from the early 1900s to the start of the new millennium]. Since then, I think, the drop from 360 to 320 is transitory. It’s temporary,” he said. Hampel also said that NIM was somewhat more volatile than ROA.

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