Credit Unions Reporting Strong Third Quarter

With more than 2,900 credit unions reporting, the credit union industry is seeing greater loan volume and balance sheet loan growth among other positive areas.


The nation’s credit unions had strong performance in the third quarter, according to initial FirstLook trends from slightly more than one-third of the industry. Here are some highlights from more than 2,900 FirstLook credit unions that have reported their third quarter finances:

  • Loan volume increased in the third quarter. FirstLook credit unions reported funding $27.0 billion in loans in the third quarter, up from $25.4 billion the previous quarter. Year-to-date, loan originations increased 6.75% for these credit unions over the first three quarters of 2010. In the second quarter of 2011, the industry saw consumer lending increase, a trend that has continued into the third quarter. FirstLook credit unions reported that 60.8% of loan originations in the first three quarters of 2011 were consumer loans, an increase from 57.5% that the same credit unions reported were consumer loans as of September 30, 2010.
  • Credit unions have been seeing balance sheet loan growth with the Federal Reserve’s interest rate freeze in August and more strength in consumer lending. FirstLook credit unions posted a year-over-year increase in outstanding loan balances of 95 basis points in the third quarter, after loans balances had been muted over the past few years due to high mortgage volume at record-low interest rates with resulting sales to the secondary market.
  • Share growth has accelerated slightly from June 2011 figures. The annual growth in shares as of September 30, 2011 was 5.7%, up from June’s rate of 5.5%. With continued share growth and slow, if positive, loan growth, the loan-to-share ratio has remained unchanged for these credit unions from June figures at 70.5%.
  • Delinquency increased two basis points over June 30 for FirstLook credit unions, but remains much lower when compared to September 30 numbers. Now at 1.42%, FirstLook credit unions posted a 23-basis-point improvement in the delinquency ratio from 2010 figures.
  • With the relatively minor increase in delinquency, credit unions’ rate of provisioning for future loan losses is unchanged from June figures. The provision for loan losses as a percentage of average assets sits at 52 basis points, which is 26 basis points lower than 2010’s rate.
  • With stable asset quality and net interest margin, pre-assessment earnings have remained consistent with June figures for these credit unions. Prior to the corporate credit union stabilization expenses, credit unions reported an ROA of 99 basis points. This is the highest pre-assessment ROA for these credit unions since September 2005’s return of 1.02%. However, due to the assessment, bottom-line earnings are lower as expected. FirstLook credit unions posted an ROA of 73 basis points, down from June’s 88 basis points, but up from the previous September’s rate of 52 basis points.
  • With positive earnings, reserves have also increased. The capital-to-assets ratio, which includes the allowance for loan losses, is 11.5% for FirstLook credit unions, up from 11.3% in September of 2010.
  • Despite positive media attention that has continued into the fourth quarter, these institutions posted lower rates of member growth than both the March and June rates. These institutions grew members at an annual rate of 1.6%.  However, new and existing members are increasing the amount of business they do at their credit unions. Share draft penetration, or the percentage of members with a checking account, increased to 49.9% for these credit unions, up significantly from the June rate of 49.0%. These credit unions grew the number of checking accounts at an annual rate of 4.9%, three times the rate of net new member growth.