shrinking margins…

As the fed keeps raising rates (I hear an 80% chance for the upcoming meeting), credit unions are trying to find new and innovative ways of squeaking out some more margin. You’ll notice by looking at some of the call reports, or just attending the TrendWatch quarterly conference call put on by creditunions.com and Callahan, lots of CU’s are getting into the business lending game. Many are investing in business lending CUSO’s to handle the larger participations.

So what about some internal margin tweaks? What are some of the basics that everyone is doing to try and keep their cost of funds down and loan yields up? Aggressive expense cutting? It looks like everyone is liking the certificate market at the moment. We’re seeing anything around the 12 month term go for at least 5.25 now.

The whole borrow short term, lend long term isn’t going to work for much longer if/when there is an inversion of the yield curve. And in that inverted state, the CU’s that will survive will be able to manage their margins internally with creative thinking. The CU’s that have to play rate games are going to have a painful time in front of them.