The Federal Reserve board raised short term interest rates to a target range of between 25 and 50 basis points. This was the first rate hike since the Great Recession. Callahan & Associates looked at what the rate hikes will mean for credit unions. According to Callahan, the credit union industry is coming off of another record quarter, with loan balances increasing 10.7 percent. Real estate loans outstanding rose 8.7 percent and growth in the auto loan portfolio is up 14.8 percent year-over-year.

“With lending accelerating it gives the industry the ability to re-price their loans,” said Jay Johnson, EVP and partner at Callahan & Associates. “Credit union CEOs and CFOs have been focused on asset-liability management (ALM) and interest rate risk putting them in a great place as rates start to increase.”

When looking at the last period of Federal Reserve initiated interest rate increases, Callahan found that credit union lending accelerated driving interest income higher. It has a graphic to show how the last cycle of interest rate hikes impacted credit unions from 2004-2007. The rise in rates should also give credit unions the opportunity to continue to support members’ borrowing needs.

Read more analysis from Reuters and the New York Times.