KBRA Financial Intelligence

Credit Union Subordinated Debt Approaches $4 Billion

Outstanding subordinated debt at U.S. credit unions reached a new record of $3.98 billion in 4Q 2023 even as borrowing costs remain at multiyear highs.

Credit unions increased their holdings of the securities by about 17% or $565 million year-over-year, according to data compiled by KBRA Financial Intelligence (KFI). Three credit unions—Park Federal, Global Federal, and GreenState Federal—all added at least $100 million or more in the period.

The market has increased following changes to regulatory rules that expanded the number of eligible credit unions that could tap the market. Starting in 2022, certain credit unions with at least $500 million in assets could sell debt to investors to satisfy risk-based capital requirements. Much of the expansion in the financing has come from the U.S. Treasury’s Emergency Capital Investment Program (ECIP), which has provided low-cost funding for underserved communities impacted by the pandemic.

Credit unions that added the most subordinated debt year-over-year:

• Park Federal Credit Union, a $1.3 billion lender in Kentucky (KFI Score: B-), added $122.1 million.

• Global Federal Credit Union, a $12 billion lender in Alaska (KFI Score: B-), added $110 million.

• GreenState Credit Union, a $11.3 billion lender in Iowa (KFI Score: C), added $100 million.

Credit unions with the most subordinated debt outstanding:

• Self-Help Federal Credit Union and Self-Help Credit Union in North Carolina (KFI Scores: B and B-) reported the most subordinated debt outstanding at $409.3 million and $301 million, respectively. Most of the financing has come from the ECIP program.

• VyStar Credit Union in Florida (KFI Score: B-) reported $200 million in financing.

• Suncoast Credit Union in Florida (KFI Score: B+) reported $175 million in subordinated debt, all of which is from the ECIP program.

KFI Pro Subscribers can use Data ID: A867C in Excel to look up subordinated debt outstanding at credit unions.