No One-Size-Fits-All Approach To Balance Sheet Management

This week, features five articles showcasing strategies different credit unions use to manage balance sheets and better serve members.

Depending on a variety of factors such as local economic environment and internal appetite for risk, managing a balance sheet is accomplished differently credit union to credit union. Therefore, optimizing the credit union balance sheet requires more than a one-size-fits-all approach.

This week, features five articles showcasing strategies different credit unions use to manage balance sheets and better serve members.

Loan participations can be a valuable tool for both buyers and sellers to actively manage their balance sheets. This is particularly true as investment yields remain at historically low levels and credit unions experience varying loan demand from different fields of membership.

In How To Buy A Participation Loan, Kevin Kesecker, vice president and chief lending officer for SECU of Maryland, discusses what loan participation buyers should look for in general and the extensive due diligence process the credit union employs in its own participation program.

Despite a 2.2% national decline in investment income between September 2014 and September 2015, total interest income increased 6.4%. A 7.0% rise in loan interest income buoyed this growth. To see a greater breakdown of the industry’s earnings performance and impact in third quarter 2015 read Earnings By The Numbers.

Credit unions are inherently complex institutions whose operations require skilled managers and consistent management. Financial and operational challenges can arise from a variety of factors and impact nearly every aspect of the credit union. From a financial perspective, executives must manage everything from branch profitability to interest rate risk.

In today’s changing and often-uncertain economic environment, balance sheet management specifically, liquidity management is top-of-mind with credit union executives. In 3 Strategies To Manage Liquidity, Sam Taft, Callahan’s director of industry analysis showcases popular ways for credit unions to manage liquidity.

When Infinity Federal Credit Union replaced its chief lending officer in 2009, the credit union had to look elsewhere for a source of income during the lengthy hiring process.

Since 2010, the credit union has generated $10.4 million in net income, including $5.8 million in gains from selling securities. As of third quarter 2015, the credit union held $84 million in investments, according to Callahan’s Peer-To-Peer software.

To learn more about this strategy, and how a resurgence in loans will change things, read How To Make Investments Pay Dividends by Callahan Associate Editor Erik Payne.

Firefighters First Credit Union expects to make $250,000 in net income this year from its in-house insurance agency, a revenue stream the California credit union expects to push to $1 million per year in the not-too-distant future.

The credit union which has five branches in Los Angeles and Northern California and primarily serves professional firefighters and their families opened Firefighter Insurance Services in 2010 and currently offers 4,800 auto, home, commercial, motorcycle, RV, boat, umbrella, life, and earthquake policies from 10 different insurance companies, including Mercury, CSE, and Safeco.

To learn how quickly its insurance services achieved profitability and why the credit union sees a bright future ahead, read How Firefighters First Credit Union Plans To Hit $1 Million In Net Income by Callahan Senior Writer Marc Rapport.

Happy Reading!

February 1, 2016

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