Catalyst News

Paramount Pros of Subordinated Debt

by Catalyst Corporate | Jun 17, 2022

Credit unions know it’s paramount to set and achieve their strategic goals. Accomplishing this comes with a fair share of challenges. Depressed net worth can be one of them. Subordinated Debt can help by building a credit union’s net worth position, supporting stronger lending, and even funding expansion.

Subordinated debt is a long-term capital management tool that can be used to achieve various strategic outcomes and goals. If you are considering a subordinated debt strategy, continue reading to learn more about the benefits.

Subordinated debt can help credit unions: CSS_Subordinated-Debt

Increase Lending:

Higher net worth supports larger loan portfolios. Subordinated debt enables credit unions to originate and portfolio more loans.

Strengthen Growth:

Issuing subordinated debt can be an attractive option to reload capital or finance growth and achieve growth levels above the rate of organic earnings.

Fund Expansion:

Whether seeking acquisitions, expanding geographically, building out your branch network, or investing in technology, subordinated debt provides capital to support your strategies while avoiding net worth dilution.

Restore Capital Levels:

After a long trend of growth, regardless of the cause, net worth may need to be restored to desired levels; subordinated debt can make this happen quick. Subordinated debt can be used to support rates of growth that exceed a credit union’s organic earnings growth rate or simply help you maintain your optimal capital level.

If your credit union has untapped opportunities, or finds net worth hindering your business plan execution, subordinated debt may be a great tool. Of course, it is not the right solution for everyone, and that is where Catalyst Strategic Solutions can help. We can talk about your unique needs, challenges, and plans to help determine if subordinated debt meets the needs of your credit union. 

If you are considering a subordinated debt strategy, tune into this session Thursday, June 30th for our Subordinated Debt Overview webinar learn more about the process and determine if it makes sense for you and your credit union. To find out if subordinated debt is the right fit for your credit union, or to schedule a no-obligation consultation, contact us today.