Balance Sheet Spreads At 10-YearLow

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WASHINGTON - (09/01/04) -- The 14 basis-point spread betweennet interest margin and operating expenses at credit unions duringthe second quarter of 2004 is the narrowest spread seen in 10years. According to Callahan & Associates, which performed theanalysis, the ever-narrower spread combined with greater operatingexpenses is putting more pressure on credit unions to focus onefficiency gains within their organizations.In 1994, the spread wasat 80 basis points, Callahan's said. "Competition has been anongoing factor in the 47 basis point decline in net interest marginsince 1994, and the low interest rates of the past three years haveintensified the margin pressures," said Callahan's EVP Jay Johnson."A continuation of this trend will soon mean that the margin willno longer be large enough to cover operating expenses in creditunions."

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