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CU Snapshot

 May '18Apr '18
# of CUs5,7225,759
Members
(millions)
115.9115.3
Total Assets
($ billions)
$1,442.8$1,455.3
Total Savings
($ billions)
$1,218.7$1,219.8
Net Cap.
Assets
10.6%10.5%
Loans to Savings83.4%82.4%
Loan Delinq.0.6%0.7%

         Credit Union Indicators

Rising rates new to many CFOs

Four fundamental factors to consider in this new environment.

From December 2016 to August 2017, the Federal Reserve raised the federal funds rate three times. CUNA predicts this rate will grow to 1.4% by year-end 2017 and to 2.25% by year-end 2018.

"Increased spending, tighter labor markets, and looming inflation will cause the [Federal Open Market Committee] to continue to raise its target interest rate gradually, with another quarter-point hike this year and further increases of 75 basis points in 2018 if the economy continues on its current path," according to CUNA's economic forecast.

Many credit union chief financial officers (CFOs) have never operated in a rising-rate environment, says Greg Gibson, CFO at $2.3 billion asset Georgia's Own Credit Union in Atlanta.

He cites four fundamental factors to consider in this environment:

1. Understand where you are. Have a firm grasp on your current asset/liability composition and balance sheet cash flows, and estimate the effect of rising rates on net interest income.

2. Plan for where you're going. What growth is projected in your strategic plan, and how will this growth influence the performance of the current balance sheet?

3. Know your market. Knowledge of pricing competition within your market is essential to developing a deposit pricing plan. But using competitors' pricing as the primary input into your price-setting plan can produce less than optimal results.

"Every balance sheet is unique," Gibson says. "Pricing should be dictated more by the needs of your balance sheet construct and your strategic plan than by your competitors' pricing."

4. Remember that rates are bidirectional. "Rates can always move up or down, even in a low-interest environment," he says.

Adapted from "Managing Deposits Through Interest-Rate Cycles," a white paper from the CUNA CFO Council available only to members. To join, visit cunacouncils.org/membership.