A regulator’s quarterly report on Kansas chartered credit unions showed another good three-month period for the financial cooperatives.
But regulators said Wednesday that persistently low interest rates are beginning to have an effect on some credit unions.
The Kansas Department of Credit Unions’ First Quarter 2013 Call Report Statistics said that total assets climbed 6.51 percent to $4.87 billion from the first quarter of 2012. In that same period, total loans grew 5.47 percent to $3.06 billion.
And the delinquency ratio edged up five-tenths of a percentage point to 0.86 percent from last year’s first quarter.
John Smith, KDCU administrator, said credit union assets generally grow the most in the first quarter of every year. He said he’s not certain why that is but speculates it could be from an influx of tax refunds and year-end bonuses.
Smith acknowledged that it was yet another good quarter for Kansas-chartered credit unions. But he said the unknown is low interest rates and their effect on credit unions. It is something he and Michael Baugh, the department’s financial examiner administrator, are closely watching.
Baugh said that he’s seeing some credit unions beginning to react to a federal funds rate that has been at near zero since December 2008. The federal funds rate is tied to the rates financial institutions offer on loans. The low rates mean margins are tight, Baugh said.
“The unknown is when interest rates are going to be increased,” Smith said.
Baugh said there are instances in which some credit unions are charging fee income on some products and services, such as on loan applications and bad checks.
Credit unions generally don’t like to institute fees for members, who technically hold ownership shares in the institutions to which they belong. But Baugh and Smith said fee income is one way for credit unions to offset tight rate margins.
“There’s a real reluctance to go the fee route to try to generate income just because it is outside the credit union model of doing business,” Baugh said.