Catalyst News

Forum: Peterson Urges Credit Unions to Watch Cost of Funds

by Catalyst Corporate | Oct 12, 2021

Credit unions will continue to face pressure on interest margins, primarily because of low interest rates, slower loan growth and downward pricing of existing loans, Casey Peterson told attendees at last month’s Economic & Payments Forum.

Facing that challenging scenario, Peterson, who is a senior advisor at Catalyst Strategic Solutions, said credit unions can improve their situation by reviewing asset earning allocation, evaluating overnight balances, adding duration and monitoring with ALM.

During Peterson’s nuts and bolts analysis, he touched on topics including interest rates, share growth and 30-year mortgage spreads.

Between discussion on credit union loan trends and loan delinquencies, Peterson turned momentarily to cost of funds.

“Cost of funds can’t be ignored,” Peterson said. “Over the course of the last 12-15 years, the cost of funds dropped from 275 to 48 basis points,” Peterson noted. “The faster that number goes down, the more opportunity there is for credit unions to collect earnings sooner and longer.”

Even if interest rates start to move higher at some point and credit unions correspondingly raise rates, your credit union would have “benefitted from the cost of funds numbers being lower for a longer period of time,” he said.

Peterson, who has been with Catalyst Strategic Solutions for more than 20 years and a presenter at the Economic & Payments Forum for nearly as many years, is a vigorous market watcher as he helps credit unions meet their goals in the areas of comprehensive financial management, ALM analysis, investment portfolio analysis and strategic planning.

Peterson, along with other balance sheet experts from Catalyst Corporate and its subsidiary Catalyst Strategic Solutions, compile relevant data and share insights in regular publications, such as Behind the Numbers and the Market Overview and Data Report, which is a comprehensive summary of prior month’s key economic and market metrics that are fundamental to credit union financial management. You can sign up to receive these regular insights, at no cost, here.

In the meantime, it is still possible to view Peterson’s Forum presentation in an on-demand format.

For a limited time, credit unions can access select presentations featuring thought leadership on timely payment and investment topics, such as The Rise of Self-Service Banking and Digital & Payments Transformations, along with Using External Capital to Propel Growth and Peterson’s Appraising Lending Portfolios and the Impact for Credit Unions. Contact your Catalyst Corporate account representative for information about on-demand access to those presentations.