With more than 98% of industry assets accounted for, 5300 Call Report data indicates credit unions posted their strongest ever loan performance through the first three quarters of 2012. The industry continued the momentum it established in 2011 and during the first six months of 2012. This quarter — with more than 6,700 credits unions reporting in Callahan’s FirstLook program — three major trends have emerged.
Record Loan Originations
The first nine months of 2012 are historic for credit unions: The industry originated more loans in the first nine months of the year than at any time in its history. First mortgage originations increased more than 60% from the first nine months of 2011 and represent the largest driver of the origination growth. Another important part of the growth was consumer loans, which include categories such as credit cards and auto loans. Consumer loans increased 18.6% from the first nine months of 2011. At $134 billion, it remains the largest area of originations for credit unions.
YEAR-TO-DATE LOAN ORIGINATIONS
Data as of September 30
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Generated by Callahan & Associates' Peer-to-Peer Software
Balance Sheet Growth
Balance sheet loan growth also increased. Annual loan growth of credit unions’ balance sheet rose to 4.2% in the third quarter. As of September 30, credit unions held nearly $600 million in members’ loans on their books.
Three parts of the portfolio drove outstanding balances higher: cars, cards, and castles. Used auto loans, a core part of credit unions’ lending strategy, grew 8.7% annually. An increase in new car sales nationally coupled with members’ choice to more often finance new vehicles with their credit union helped credit unions sustain their new auto lending momentum in the second half of the year. For the second quarter in a row, credit unions posted positive loan growth, and at the end of third quarter credit unions posted a 6.5% annual growth in new auto loans.
In addition to cars, credit union members also increased their credit card balances. Outstanding balances increased 5.3% annually to $38.2 billion. First mortgages, with 7.0% annual growth as of September, also played a strong role in the overall increase in loans.
Credit unions are building deeper relationships with their members. This quarter’s increased loan growth comes at a time when credit unions are also adding members at a faster pace than ever before. Instead of merely adding members and establishing one-off relationships with them, credit unions are persuading new members to embrace a financially holistic relationship with the credit union. For example, credit union share draft penetration — which indicates members are using the credit union as their primary financial institution — increased annually. According to the data supplied by FirstLook credit unions, more than half of credit union members had share drafts with the credit union.
Callahan’s FirstLook program provides analysis and access to quarterly performance data nearly a month before NCUA's official release. Come back to CreditUnions.com over the next few weeks for updates and analysis on the quarterly performance of the country’s 7,000 credit unions.