ALM rebalancing act
CFOs and ALCOs tackle distorted balance sheets in 2021 after surviving the knocks of 2020.
Credit unions are moving through 2021 with skewed balance sheets, asset/liability mismatches and pinched net worth after the turbulent and disruptive but survivable hurricane called 2020. The experience varied from CU to CU, from state to state and even from month to month.
That mixture of good and bad months added up to a pretty decent 2020 financially for $715 million 4Front Credit Union, Traverse City, Michigan, according to CUES member Karl Pagel, SVP/finance. “In the spring, a lot of economic activity had pretty much shut down,” he details. “By late summer, we could barely keep up with loan demand. By December, things were relatively calm.”
4Front CU grew by $150 million in 2020, exceeding its $105 million projection, fed by the influx of deposits. Loans—particularly indirect auto and home mortgage—absorbed some of that liability surge, but the investment portfolio doubled, from $60 million to $120 million, Pagel reports. Lower asset yields were offset by lower costs and greater fee income to the point where 2020 earnings were up a bit over 2019 in dollars, he explains, but down 5 basis points in return on assets due to its bigger balance sheet.
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