Credit unions are working to protect their net interest margins without adding undue interest rate risk and CFOs expect their attention in the second half of the year will remain on squeezing what they can from investment portfolios.
“Our ability to manage our investment portfolio has become much more critical,” said Bryanna Tapley, CFO at CP Federal Credit Union in Jackson, Mich. and a member of the executive committee of Credit Union National Association’s CFO Council, pointing out that right now her investment portfolio comprises nearly one-third of the CU's overall balance sheet.
“Today we've moved into the agency market, done some step-ups, added mortgage-backed securities to our portfolio and started looking at some of the mutual funds, but really we're focusing on that overall investment strategy and managing it to interest rate risk and the risk environment,” she said.
Tapley's credit union has for the most part not repriced its rates in 2012, but may do so before the end of the year. “I think we still have some opportunities to reduce our costs of funds,” she said, adding that the specifics of potential repricing are still being worked out.
CP FCU plans to spend the second half of the year following through on investments and projects that began in 2011, such as website upgrades and additions to its mobile platform. Among those are online loan applications with automatic decisioning and remote deposit capture, both of which are expected to roll out by year's end.
CP FCU is shooting for 0.4% ROA, having finished 2011 with 0.3%, along with a 4% bonus dividend and interest rebate to members.
Tapley said that her CU is “pretty reflective of what's going on” at credit unions nationwide. “Some credit unions are going into those delayed expenditures and so are we, but they're focused on 'What is the absolute I'm going to get out of this? Is this generating the value I'm anticipating and is it generating enough?'“
