C. Myblog

c. notes Excerpt: Thriving In A World of Shrinking Margins

May 10, 2012

As interest rates have been at historic lows for a prolonged period of time, credit unions have had the benefit of lowering their cost of funds (COF) as loan and investment yields decline.  Many seem to have worked through their credit issues and, at least for now, have been able to reduce their provision for loan losses (PLL)—another counter-balance to declining asset yields.

Unfortunately, for many, the COF and PLL have—or will soon—hit a floor while asset yields continue to decline.  Some have turned to longer-term assets, such as mortgages, mortgage investments and callable bonds to help current earnings. However, these options add interest rate risk in a rising rate environment.

To read the full article, please see our c. notes page, available here.

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