CFO Focus: Credit unions need to improve their efficiency and monitor their cost of funds

A data-driven look at CUs’ current situation

A critical issue for credit unions going forward will be the need to improve their efficiency ratios. A big focus in doing so has to be on more effective revenue generation rather than on cost reduction.

That doesn’t mean that credit unions shouldn’t watch how they spend their money, but it does suggest that bigger gains will be had by focusing on loan generation and effective pricing of loans.

The industry also will need to continue to pay attention to the cost of funds. There will be a lot of pressure on core funding rates in 2023, and simply following interest rates up on the deposit side for competitive reasons will put additional pressure on the efficiency ratio. We need to be more nuanced in how we price both deposits and loans in 2023.

To help illustrate these ideas, my team and I have pulled together some data on credit union performance related to efficiency. These are data for all credit unions above $25 million in assets, as the very small ones distort the numbers to some extent.


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