Credit Unions Still Driven By Lending

The 698 credit unions that have reported to Callahan & Associates’ First Look program collectively posted a strong performance through third quarter 2002. These credit unions, representing 28% of the industry with $157 billion in assets, are generating a larger portion of their income through loans. Although the industry has not originated loans to the same lofty standards set in the nineties, credit unions are still primarily lending operations. To be successful, credit unions must earn income through lending in any environment.

 
 

The 698 credit unions that have reported to Callahan & Associates’ First Look program collectively posted a strong performance through third quarter 2002. These credit unions, representing 28% of the industry with $157 billion in assets, are generating a larger portion of their income through loans. Although the industry has not originated loans to the same lofty standards set in the nineties, credit unions are still primarily lending operations. To be successful, credit unions must earn income through lending in any environment.

Two years ago, the credit union loan to share ratio was at an all time high after finishing a decade of double-digit loan growth coupled with single-digit share growth. (The graph below shows the loan to share ratio of the First Look credit unions.) The last two years have seen a complete flip-flop, with shares growing at a tremendous pace and loans slipping into single-digit growth territory. The growing gap between shares and loans on the books led to a 23% growth in invested dollars over the last twelve months.

 

 

 

Nov. 4, 2002


Comments

 
 
 
  • I've always found it interesting that as an industry, we talk about loan-to-share ratios. There is as much difference between a credit union with high concentrations of fixed first mortgage loans compared to one with consumer loans as if one were completely investing in long-term bonds and one in short-term funds. Yet, I never see a distinction between the two. I wonder if it leads us to the wrong conclusions. I think the reality is that many credit unions have been booking more real estate loans this year. I always take the CUNA peer group information and have to compute consumer loan-to-shares (or assets) to determine our own peer group for lending. I always end up with a different group than just looking at loans-to-shares.
    Doug Ferraro Bellco Financial Services
    Anonymous