Interest rate risk as the economy improves could be a concernfor credit union managers, said the NCUA in its latest economicvideo analysis.
|John Worth, the agency's chief economist, discussed how creditunions can benefit from economic improvements while remainingvigilant about interest rate risks.
|“The improving economy is a positive sign for credit unions andtheir members,” Worth said in his December Economic Update video. “Falling unemployment andimproving consumer balance sheets are likely to help boostmembership rolls, increase loan demand and improve loanquality.”
|But, he said, credit unions are increasingly reaching for yieldby lengthening the maturity structure of their investmentportfolios.
|“In a rapidly changing interest rate environment, this strategycan boost earnings today but result in significant challenges tocredit unions later in the interest rate cycle,” the NCUA economist warned.
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