Preliminary fourth quarter data from Callahan’s First Look program indicates that credit unions closed the year with solid momentum in loan, share, and member growth. While lending still set the pace in growth, rising at an 11.2% annualized rate in the quarter, share growth was not far behind with a 10% annualized increase. The First Look credit unions account for over $210 billion in assets -- approximately 29% of total industry assets. With an average asset size of $468 million, these credit unions provide an early read on the direction of industry trends though their results will vary from final industry numbers.
Share Growth Tops 2005 Results
The share growth rate is the most surprising number in the First Look results. Fourth quarter is typically slow for deposit growth as members spend more during the holiday season. However, these early results place the fourth quarter’s growth rate behind only the first quarter (typically the fastest quarter for share growth) for the year. The momentum was strong enough to push the share growth rate in 2006 ahead of 2005’s results despite lagging through the third quarter.
Credit unions have become more aggressive with rates on savings products as dividend payments to members are up over 47% in 2006. The strategy is delivering results as the three fastest growing share growth categories – certificates, IRAs, and money market – all posted growth rates in 2006 that exceed 2005 results.
Bottom Line Rises on Loan Interest Income
Total income for First Look credit unions grew at a double digit pace for the second consecutive year. Loan interest income was the fastest growing income category, rising due to the impact of higher rates as well as continued growth in the loan portfolio.
Despite the large jump in dividend payments, net income rose for the year after declining in 2005. ROA of 94 basis points is down five basis points versus 2005 results among First Look credit unions, but capital remains strong at 10.9% of assets.
Positioned for Success in 2007
Member growth for the year is on par with 2005’s growth rate, and the fourth quarter’s member increase indicates that credit union value is becoming more evident as the rate environment stabilizes. The strong finish to 2006 may point to the end of credit unions’ growth stall and the beginning of renewed momentum in 2007.