Credit Union Loan Volume Continues to Rise in Third Quarter

Credit unions have shown they will make loans to meet their members’ needs.

 
 

The author of a recent article in the Wall Street Journal discussing J.P. Morgan's tightening lending practices said " … it will be a long time before the business of making loans recovers." This may be true for banks, but credit unions have shown that they will continue to make loans to meet their members' needs.

Callahan's third quarter First Look data indicates that the credit union industry has originated 6.2% more loans year-to-date than at the same time in 2008. Also, the industry's amount of loans outstanding has grown by 3.8% over the same period. Callahan's First Look Program is the only source of aggregate credit union data for the third quarter, currently covering 99 percent of the industry by assets.


Auto Loan Growth Drives Leading Group in Third Quarter

Being able to review the industry in aggregate can lead to some interesting discoveries. Since the beginning of the current financial downturn, credit unions with total assets between $250 million and $500 million are growing their loan portfolio more rapidly than any other segment of the credit union industry. Callahan's latest First Look data for 3Q indicates that the $250-500 million group leads the rest of the industry, growing their loan portfolio by 5.0% annually.

Peer Group Classification

First Look Data as of September 30, 2009

Peer Group

No. of Credit Unions

Total Assets (000s)

12 Month Loan Growth

12 Month YTD Loan Origination Growth

Under $2M

1,088

$980,811

-2.2%

6.2%

$2M – $5M

933

$3,182,807

-1.2%

3.5%

$5M – $10M

1,040

$7,623,764

0.0%

4.6%

$10M – $20M

1,103

$15,855,071

1.5%

6.8%

$20M – $50M

1,355

$43,846,816

4.0%

4.9%

$50M – $100M

754

$53,137,380

4.4%

5.9%

$100M – $250M

690

$108,188,199

4.8%

-0.8%

$250M – $500M

317

$112,121,303

5.0%

10.8%

$500M – $1B

196

$137,715,076

4.5%

11.3%

Over $1B

155

$391,755,922

3.1%

5.5%

U.S. Totals

7,631

$874,407,150

3.8%

6.2%

Balance sheet growth was driven by auto lending but the group also reported above-average first mortgage loan growth. This peer group grew auto loans at annual rate of 5.2%, more than a full percentage point above the next closest group and 360 basis points above the industry's average figure of 1.6%. This group also recorded an above average first mortgage loan growth of 4.6% compared to the industry's figure of 4.3%.

These 300 credit unions also reported 12-month loan origination growth of 10.8%, second only to the 11.3% figure of credit unions $500 million to $1 billion in total assets. The group also sold 57% of their first mortgage originations to the secondary market, more than double the 25% rate they sold a year ago and slightly above the current industry average of 55%.

Thus far, their asset quality is holding strong. First Look data for 3Q 2009 shows that the $250 - $500 million group's delinquency ratio is 1.61%, third lowest of any segment and eight basis points below the industry average of 1.69%.

In the present rate environment, increased lending can be the key to increased earnings. However, holding loans with low rates may hamper the long term potential earnings of a credit union's portfolio. So, it is interesting to see that credit unions in this asset range are not only increasing the amount of loans they are issuing but have also increased the amount of loans on their balance sheet.


If you would like to be able to analyze these trends more closely Callahan & Associates offers two software solutions, Peer-to-Peer and CUAnalyzer, that can help you analyze industry trends and allows you to benchmark yourself against your peers.

 

 

 

Nov. 16, 2009


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