Published in: CU Business

2018 proved to be an eventful, and profitable, year for most credit unions. Amidst heightened volatility from domestic and international  concerns, credit union performance reached post-crisis highs over the year (Figure 1). Now, in early 2019, many institutions are asking  themselves what’s next? Searching for creative ways to maintain and grow profitability in 2019 is a task at the top of many financial  executives’ to-do lists. When faced with uncertainty like this, it’s usually a good idea to go back to tried-and-true core lending principles:  asset pricing discipline, marginal return analysis, and leverage strategies.

1

For many years now, securities portfolios have dwindled as a percentage of average assets as institutions focus on lending. This allocation  to credit-riskier assets has led to higher profits. Figure 2 highlights the change in balance sheet composition starting in 2011. As of Q318,  loans-to-assets sits at over 70%, while securities-to-assets was below 15% for the industry.

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