Longer-term Investments are Paying Off

Preliminary third quarter data gathered from the First Look program shows that despite widespread prediction that interest rates were not expected to rise (rates in fact dropped .50 basis points six weeks after the quarter ended), most credit unions were hesitant to invest in longer-term maturities this past quarter. In fact, the data shows that credit unions took a slightly more risk-averse approach to investment structure than in the second quarter. Current data indicates that investments with a maturity of 3 years or more make up 11.5% of 3rd-quarter industry investments, whereas the same, longer-term investments made up 13% of total investments at June 2002.

 
 


Preliminary third quarter data gathered from the First Look program shows that despite widespread prediction that interest rates were not expected to rise (rates in fact dropped .50 basis points six weeks after the quarter ended), most credit unions were hesitant to invest in longer-term maturities this past quarter. In fact, the data shows that credit unions took a slightly more risk-averse approach to investment structure than in the second quarter. Current data indicates that investments with a maturity of 3 years or more make up 11.5% of 3rd-quarter industry investments, whereas the same, longer-term investments made up 13% of total investments at June 2002.

Short-term investments (those less than one year) increased just slightly from 54.5% to 55.4% of total industry investments. However, those credit unions choosing longer-term investments are seeing positive results in increased yield. The graph below shows those 10 CUs who have demonstrated the largest percentage of investments greater than 3 years. These CUs, whose investment portfolios show a long-term investment percentage five times that of the average credit union, combined for an average investment yield of 3.86%, compared to the total group average of 2.67%

Rank
St
Name of Credit Union
% of investments
greater than 3 yrs
in maturity
Yield on
average investment
Investments
Assets
1
IN
Beacon
74.46%
4.67%
$161,466,080 $458,858,391
2
IL
Abbott Laboratories Employees
67.38%
4.87%
$59,937,284 $247,898,540
3
TX
Reed
61.57%
5.68%
$14,075,702 $14,982,027
4
NC
Greater Kinston
58.32%
4.65%
$5,874,936 $8,355,624
5
TX
Houston Association Of Realtor
57.68%
3.85%
$6,532,581 $8,423,215
6
WI
Summit
57.49%
2.70%
$142,191,713 $503,627,090
7
IL
Valley Bell
52.90%
4.52%
$6,230,452 $14,745,995
8
CA
Financial 21 Community
51.61%
3.20%
$38,955,192 $124,707,994
9
VA
Virginia Credit Union Inc.
48.23%
3.83%
$388,399,277 $979,179,733
10
WI
Wausau Insurance Employees
46.97%
4.26%
$28,848,807 $128,401,702
Averages for 10 credit unions:
56.05%
3.86%
$82,720,476 $248,918,031
Data at 9/30/02        

The data, submitted by credit unions participating in Callahan & Associates’ First Look Program, is from 1,295 credit unions with combined assets of $189.2 billion, representing approximately 35% of industry assets. Participating credit unions contribute the data that make up Callahan’s First Look industry snapshot, tracking credit union trends weeks before the final reports are available.

 

 

 

Nov. 25, 2002


Comments

 
 
 
  • no comment on shortening durations due to falling interest rates, prepays eroding longer term holdings, altering percentages. there should be.
    Anonymous
     
     
     
  • Good job of combining overview of trends with specific examples. Very readable.
    Anonymous