Feb. 19, 2018


  • Those observations are correct in the sense that the removal of the quarter-end assets does drive up the yields. But yields are not the focus of what we do. Our strategy is to focus on opportunities wherever they may come from, and not to simply focus on the yield component. Our strategy has been to create a balanced portfolio and take advantage of the FHLB’s dividend opportunity. By maximizing the level of borrowings, we have ensured the maximum dividend is available to the credit union. We have outperformed peers in yield on our core fixed income book since I arrived, and coupled with the dividend yields (7% to 11%) we have consistently hit yields of over 3%. I recognize that our investment yields can look unusually high but even our core economic results and yields are still well above industry averages. We are simply a high-performing credit union that leverages any opportunity we can to safely and effectively return maximum value to our members. If you have additional questions or comments please feel free to contact KeyPoint’s CFO, Tim Green at tgreen@kpcu.com.
  • Thank you, James and Moritz, for your comments. We're working to provide a full reply to your observations.
    Marc Rapport
  • Am I the only one who finds said stated yields to be highly unachievable and unlikely in today's marketplace? Nothing I could find within the article adequately or clearly identified 'how' these outsized yields were being achieved. Nothing in the credit union's investment mix or maturities suggest outsized yields would be likely, especially without extension of duration (and even then ...). The FHLB dividend has been very strong as of late, but I find it hard to believe that, in and of itself, it could drive yields so far, and consistently above peer. Call Report yield is calculated with a numerator and denominator, the denominator being average investments for the quarter. Is the denominator being reduced (via repaid borrowings or otherwise) just prior to quarter-end, resulting in an outsized yield calculation? The key appears to be their arbitrage play, not the credit union's regular investment holdings ... yet the article seemed to place equal, if not more, focus on the make up of the institution's holdings. The danger here is that other credit unions' executives and boards will read this and wonder "what are we doing wrong?!" and push investment executives to pursue greater risk with little understanding of what is truly happening behind the scenes.
    Moritz Wohanka
  • No you are not, Moritz. Pursuant to reading the article and before I read your response, I spent some agonizing minutes trying to ascertain how such yields were achievable, especially given the large increase in yield from 12/31/16 to 12/31/17 of 91 bps (3.19% to 4.11%) per a high-performance peer report comparing KeyPoint CU to its Top 25% CUs with assets > 500MM from data generated by SNL. Those minutes were agonizing as I am a veteran broker who takes pride in offering my CU customers strategies and products so that they can become one of the top 25% among their high-performing peers. Have I overlooked something? Without having read your comment, I forwarded an email with a link to the article to my senior Fixed Income Strategist that closely mirrored your concerns. His response was to laugh and refer to me to your comment. I thoroughly enjoy reading the excellent articles on this site, but this one has at lease three of us flummoxed! It would be great to see a follow up article that offers a little more clarity.
    James H.