Credit unions are experiencing a significant increase in new loans
granted, but how is the higher volume impacting their balance sheets?
Recent data reveals an interesting trend.
union industry experienced a significant increase in the amount
of loans granted for the first nine months of 2001 versus the first
nine months of 2000. A large portion of this increase in borrowing
can be attributed to the low financing rates on loans that borrowers
were able to obtain. However, although loans granted have increased,
it appears that more of these loans are refinancing existing loans
rather than bringing real loan growth to credit unions. The most
recent data shows that despite greater originations, the growth
in total loans outstanding has actually slowed from 2000.
Callahan & Associates' 3rd Quarter Research & Data Report,
Credit unions with assets greater than $100 million granted $101.6
billion in new loans in the first nine months of 2001 versus $83.9
billion dollars over the same period in 2000, representing a 21.1%
increase. However, total loans outstanding as of September 30, 2001
have increased only $16.0 billion from year-end 2000 versus an increase
of $19.4 billion from December 31, 1999 to September 30, 2000. This
equates to a 17.3% decline in the loan growth despite 21.1% growth
in originations! It seems that credit unions are working more but
realizing less growth for their efforts.
to look at this is to calculate the dollar growth in loans outstanding
as a percentage of originations. Viewed this way, for every $1 originated
through the first nine months of 2000, credit unions added $0.23
to their balance sheet. As the following chart shows, in 2001 this
figure has fallen to less than $0.16 of every $1, a 31.1% decline.
While part of the decline in this ratio can be explained by an increase
in first mortgage securitizations in 2001, the trend is the same
even when securitized loans are added to the outstanding balance.
unions will likely feel margin pressure as higher paying loans are
replaced in their portfolio, they are keeping their focus on providing
members with the highest level of service through their active participation
in the latest round of refinancing.