It is always interesting to compare credit union data from period to period, and the first quarter of 2005 is no exception. There is usually a number that generates interest among industry participants and contains embedded within an interesting “story.” For the first quarter 2005, one number that is creating a little buzz is outstanding borrowings.
At the end of the first quarter 2004, borrowings for the entire credit union system totaled $11.7 billion. For 2005, that number increased to $15.5 billion, a 32 percent jump (see chart below). What does the increase in borrowings tell us about the strategies used by credit union managers? Are the borrowings more a function of funding loans, or a strategic decision to insulate interest rate risk, driven in part by the shape of the yield curve?
Borrowings were one of a number of topics discussed at CUNA’s annual CFO Council conference. One of this year’s presenters was James Eibel, vice president with the Federal Home Loan Bank in Indianapolis. Eibel discussed with the CFOs in attendance the importance of having funding options as part of their overall ALM strategy. Having the structure in place to borrow – whether it be from the Federal Home Loan Bank or their corporate credit union – is just a prudent step in establishing funding alternatives.