News & Insights

Catalyst has seen a sharp uptick in derivative trading activity through the first half of 2023, and it appears more than just Catalyst clients are increasing their trading activity. Since the end of 2019, total derivatives outstanding have increased from $13.2 billion to almost $34 billion as of March 31, 2023.

Subordinated debt usage has exploded over recent years. Since the end of 2017, total outstanding subordinated debt has increased from $223.5 million to over $3.6 billion.

As 2023 unfolds, credit unions remain focused on expansion and growth, even though liquidity has tightened, and share growth has slowed. While near-term growth may be difficult to achieve, market indications suggest that share growth will rebound later in 2023 or early 2024.

Is your credit union considering an investment in Subordinated Debt? If so, carefully evaluate your potential issuers. Five key areas can help determine their strength: growth trends, loan quality, earnings capacity, liquidity and planned use of funds.

With the first quarter of 2022 in the books, analysts at Catalyst Strategic Solutions have seen a large uptick in credit unions seeking to issue subordinated debt. The specific business case for each issuer has varied, but the core underlying drivers have been consistent.

The rise in interest rates has caused the values of mortgage portfolios and long-term investments to decline. Some credit unions and board members have said, “Maybe we should stop or slow down our mortgage lending.” My answer to them is always the same: Wait, let’s talk this through first.