Higher funding costs have caused South Australian based Savings & Loans Credit Union to report a 31 per cent fall in net profit to $10.9 million, for the 2008 financial year.Interest income increased 28 per cent to $218 million, but was outpaced by the 41 per cent increase in interest expense to $157 million.Alternate funding through retail deposits eased the pain, increasing 16 per cent to $1.83 billion, driven by a 25 per cent rise in term deposits to just over one billion dollars.Total loans increased 19 per cent to $2.6 billion, with residential lending up 20 per cent to $2.1 billion.Just under 90 per cent of Savings & Loans lending is currently domiciled in South Australia, which will slowly reduce due to interstate branch openings, said chief executive Greg Connor."Now in Victoria we have two branches in Ballarat, one in Warrnambool, three in Melbourne and three in Darwin - so we are moving our base around."Connor adds the new branches take up to two years to break even, and become profitable after their third to fourth year of operation - with the credit union currently having nine branches yet to reach a second birthday."We are pleased with the way the sales in the new branches are coming along. Melbourne was very expensive, as we came in cold and had to develop a brand presence, though we will write record loans in personal lending in August."Connor said the Austral Credit Union members are in the process of voting on the proposed merger, and if an approval is granted, the four Austral branches, six agencies and 14 automated teller machines will be rebranded to Savings & Loans.The Austral special general meeting is next Monday.