Industry Performance By The Numbers (4Q 2014)

A break down of the industry’s financial performance and impact in 4Q 2014.

 
 

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LENDING AUTO LENDING MORTGAGE LENDING
CREDIT CARDS SHARES INVESTMENTS
MEMBER RELATIONSHIPS EARNINGS RISK-BASED CAPITAL

 

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LENDING

12 months of breaking records and changing lives.

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Credit unions lent $354.3 billion in loans throughout 2014. That’s a new record that surpassed last year’s volume by 0.9%. With this increase in originations, outstanding loan growth was more than double the rate of share growth — 10.4% versus 4.5%. As a result, the loan-to-share ratio — which measures to what degree credit unions are lent out — finally reached a level in line with pre-recession norms. Increased lending activity also generated a 4.4% annual uptick in loan interest income for credit unions.

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For All U.S. Credit Unions
Source for all images unless otherwise noted:
Peer-to-Peer Analytics by Callahan & Associates

A 4.3% increase in U.S. personal consumption expenditures in the fourth quarter of 2014 indicates that members are finally comfortable saving less and spending more. This trend is mirrored in credit union consumer loan origination levels, including auto, credit cards, and more. These grew 14.2% over 2013 to reach $220.4 billion in 2014. Auto lending in particular continued to be a star performer, with outstanding new auto loans growing 20.9% annually and used auto loans growing 12.9%.

 

 

 

26.5M

The number of loans made to members in 2014, up from 24.3 million in 2013.

 

2x

Loans are growing over two times faster than shares as of December 2014.

 


LENDING AUTO LENDING MORTGAGE LENDING
CREDIT CARDS SHARES INVESTMENTS
MEMBER RELATIONSHIPS EARNINGS RISK-BASED CAPITAL

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AUTO LENDING

Auto lending was the year’s can’t-miss opportunity.

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For All U.S. Credit Unions
Source for all images unless otherwise noted:
Peer-to-Peer Analytics by Callahan & Associates

 

Auto sales took off in 2014, with 16.5 million cars sold during the year. That’s an increase of nearly 6% from 2013 and the highest total since 2006. Few credit unions let that opportunity pass by.

As of December 2014, the industry reported new auto loan growth of 20.9% and used auto loan growth of 12.9%. That’s up from 12.7% and 10.5%, respectively, in 2013. Market share also increased to 16.3% in 2014. That’s a bump of 1.3 percentage points from the year prior.

New auto lending was the fastest-growing segment of the loan portfolio in 2014; used auto loan growth came in third behind business loans. With analysts anticipating 17 million vehicle sales in 2015 and as many as 20 million in annual sales by 2018, auto lending should continue to be a boon to credit unions for years to come.

 

Auto Loan Originations: 1.5M

The number of new and used auto loans added to the books of credit unions in 2014.

Source: Callahan & Associates

 

2013: 15.0% vs. 2014: 16.3%

The industry’s market share for auto loan originations increased 1.3 percentage points in 2014.

Source: Autocount Data From Experian Automotive; Callahan & Associates

 

 

2014 YTD Credit Union Auto Loan Origination Market Share By State
For all U.S. credit unions | Data as of Dec. 31
© Callahan & Associates | www.creditunions.com

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Source: Autocount Data From Experian Automotive

 


LENDING AUTO LENDING MORTGAGE LENDING
CREDIT CARDS SHARES INVESTMENTS
MEMBER RELATIONSHIPS EARNINGS RISK-BASED CAPITAL

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For All U.S. Credit Unions
Source for all images unless otherwise noted:
Peer-to-Peer Analytics by Callahan & Associates

MORTGAGE LENDING

The refi boom busted, but overall market share made gains.

Credit unions originated $94.3 billion in mortgages in 2014. Adjustable rate and hybrid mortgages were popular options that comprised approximately 36.5% of total first mortgage originations in the fourth quarter compared to as little as 17.6% in 2012.

Despite successes with ARMs and hybrids, overall credit union mortgage origination activity was down 21.2% from the $119.6 billion originated in 2013. This decrease was largely the result of diminished refinancing activity and was still less than half the 39% decline seen in the overall mortgage market. As such, credit unions actually increased their market share here.

In 2014, more home shoppers made a credit union their institution of choice for mortgage financing, a potential signal of gains made in the battle over consumer awareness. The cooperative industry accounted for 8.4% of all U.S. mortgage originations, according to the Mortgage Bankers Association. This is much improved from the 6.9% market share captured in 2013 and nearly double the 4.5% market share held in 2009. Credit unions held more mortgages on their balance sheets in 2014, as evidenced by annual outstanding first mortgage loan growth of 9.1% compared to 8.7% the previous year.

 

Rank State Credit Union* Annual Growth In 1st Mortgage Originations 2014 1st Mortgage Originations 2013 1st Mortgage Originations Total Assets
1 SC CPM 571.4% $7,572,610 $1,127,900 $294,694,082
2 WI People's Choice 375.8% $6,360,316 $1,336,835 $28,557,160
3 PA Tri County Area 372.5% $6,949,142 $1,470,600 $109,961,174
4 MO CU Community 315.8% $12,012,073 $2,888,601 $95,451,977
5 PA Butler Armco Employees 313.7% $13,082,244 $3,162,601 $289,673,597
6 TX Communities of Abilene 280.8% $4,183,521 $1,098,489 $128,628,601
7 WY Trona Valley Community 268.7% $16,852,627 $4,570,733 $164,083,159
8 IL Community Trust 252.5% $13,522,199 $3,836,316 $191,784,102
9 NY Family First 248.2% $36,839,059 $10,580,715 $156,693,377
10 CT General Electric Employees 244.5% $15,512,500 $4,503,002 $178,122,342


*Excludes credit unions with less than 50 originations in 2014 and 10 in 2013.


LENDING AUTO LENDING MORTGAGE LENDING
CREDIT CARDS SHARES INVESTMENTS
MEMBER RELATIONSHIPS EARNINGS RISK-BASED CAPITAL

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CREDIT CARDS

Cards kept shining despite evolution in the payments space.

Credit unions posted multiple credit card records in 2014 despite interloping competitors and growing uncertainty in that area of the market. Balances totaled $46.4 billion at year-end, marking an annual growth rate — 7.9% — that is the fastest since the fourth quarter of 2008.

In addition, credit unions issued 1.1 million credit cards in 2014, representing a 7.3% annual increase. This outpaced the 3.1% annual growth in membership, which led to credit card penetration hitting a new high-water mark of 16.6%. Total market share also increased 30 basis points to 5.3% last year.

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Growth in credit cards, however, did not diminish asset quality. In fact, asset quality improved. As of December 2014, the credit card delinquency rate and net charge-off ratio stood at 0.94% and 1.81%, respectively. That’s a significant drop from the 2.02% and 4.15% reported five year ago during the depths of the recession.

Finally, card programs managed in-house became more prevalent among credit unions in 2014. At year-end 2014, more than 57.6% of the industry offered a credit card program to members, up from 56.3% at the end of 2013. 

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For All U.S. Credit Unions
Source for all images unless otherwise noted:
Peer-to-Peer Analytics by Callahan & Associates

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LENDING AUTO LENDING MORTGAGE LENDING
CREDIT CARDS SHARES INVESTMENTS
MEMBER RELATIONSHIPS EARNINGS RISK-BASED CAPITAL

SHARES

Consumers shifted their attention, but credit unions still made share progress.

2.9M

The increase in the number of share draft accounts at credit unions between December 2013 and December 2014.


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For All U.S. Credit Unions
Source for all images unless otherwise noted:
Peer-to-Peer Analytics by Callahan & Associates

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MEMBER BUSINESS LOANS

Expanded expertise helped MBL make double-digit strides.

213,453

The number of outstanding member business loans as of year end 2014.

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For All U.S. Credit Unions
Source for all images unless otherwise noted:
Peer-to-Peer Analytics by Callahan & Associates

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LENDING AUTO LENDING MORTGAGE LENDING
CREDIT CARDS SHARES INVESTMENTS
MEMBER RELATIONSHIPS EARNINGS RISK-BASED CAPITAL

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INVESTMENTS

Credit unions invested less and made more.

Accelerating loan growth suppressed total investment balances, including cash. Investment balances declined 3.4% annually, dropping from $369.0 billion at year-end 2013 to $356.6 billion at the close of 2014.

Many credit unions remained more liquid to meet surging loan demand. As such, investments maturing between one and three years comprised the largest portion of the industry’s portfolio — 27.5% of total investments. That’s an increase of 23.9% from the year prior.

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For All U.S. Credit Unions
Source for all images unless otherwise noted:
Peer-to-Peer Analytics by Callahan & Associates

Despite a 1.9% annual decline, cash and cash equivalents remained the second-largest portion of the overall investment portfolio, representing 23.8% of total balances at the end of 2014.

Lower cash balances and higher-yielding asset purchases resulted in a rise in credit unions’ investment yield over the past year. This reached 1.24% as of December 2014, up 10 basis points from 2013.

 


LENDING AUTO LENDING MORTGAGE LENDING
CREDIT CARDS SHARES INVESTMENTS
MEMBER RELATIONSHIPS EARNINGS RISK-BASED CAPITAL

MEMBER RELATIONSHIPS

Members conducted more business, more often.

Thanks to accelerating loan growth and improving share growth, the average member relationship increased 3.7% over the past year to $16,753 as of December 2014.

Average loan balance per member, excluding member business loans, increased 6.8% and reached $6,706 at year-end. Lending activity contributed the most to overall relationship growth during this period, but higher penetration rates for share draft accounts as well as autos, credit cards, and mortgages all indicate members have strengthened their relationships with credit unions this year.

 

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For All U.S. Credit Unions
Source: Callahan & Associates’ Peer-to-Peer Analytics

A Year One Century In The Making

Read the Industry Perfomance overview article by Jay Johnson, executive vice president at Callahan & Associates.

Click Here

 


LENDING AUTO LENDING MORTGAGE LENDING
CREDIT CARDS SHARES INVESTMENTS
MEMBER RELATIONSHIPS EARNINGS RISK-BASED CAPITAL

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For All U.S. Credit Unions
Source for all images unless otherwise noted:
Peer-to-Peer Analytics by Callahan & Associates

EARNINGS

Back-to-basics proved fruitful.

Underpinned by growth in loan and investment income, total income increased 3.1% annually to top $51 billion in 2014. Total interest income increased 4.5% annually, which helped offset a 0.2% decline in total non-interest income.

Loan interest income reached $33.0 billion in 2014; that’s an annual increase of 4.4%. As a result, the net interest margin expanded for the fourth consecutive quarter — this time by four basis points.

Investment income climbed to $4.5 billion for the year at an annual growth rate of 5.4%. Meanwhile, total non-interest income fell 0.2% compared to the year prior, with other operating income’s gain of 3.6% unable to replace a 3.7% loss in fee income.

Fee income as a percentage of average assets declined five basis points annually; other operating income dropped one basis point. The decline in the latter is likely the result of changing mortgage conditions. Credit unions sold $31.5 billion in first mortgages to the secondary market in 2014; that’s a decrease of 43.0% from one year ago.

Despite environmental changes and regulatory hurdles, credit unions have skillfully managed their expenses. The industry’s operating expense ratio dropped five basis points to 3.12%. For 2014, the industry’s total return on assets was 0.80%, two basis points above 2013 levels.

-0.2%

Non-Interest Income Growth

4.5%

Interest Income Growth

3.1%

Growth In Total Revenue

 


LENDING AUTO LENDING MORTGAGE LENDING
CREDIT CARDS SHARES INVESTMENTS
MEMBER RELATIONSHIPS EARNINGS RISK-BASED CAPITAL

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For All U.S. Credit Unions
Source for all images unless otherwise noted:
Peer-to-Peer Analytics by Callahan & Associates

Risk-Based Capital

Engagement ensures a more prosperous future.

The National Credit Union Administration (NCUA) issued a second iteration of its proposed risk-based capital (RBC) rule in January 2015. The board voted 2-to-1 to issue the updated rule, with the newest board member, Mark McWatters, dissenting on the grounds that he believes the Federal Credit Union Act does not give the NCUA the legal authority to adopt a two-tiered RBC structure for well-capitalized and adequately capitalized credit unions.

The NCUA released the first iteration of RBC regulation nearly one year earlier and received more than 2,000 public comments. The agency made significant changes to the proposal based on that feedback, such as:

  • Increasing the minimum asset size for which the rule applies from $50 million to $100 million.
  • Removing the 1.25% cap for allowance for loan and lease losses as a percentage of risk-weighted assets.
  • Increasing the implementation timeline to four years compared to 18 months.
  • Removing the individual minimum capital requirement (IMCR).

Additionally, the NCUA removed the interest rate risk component in favor of introducing a separate, upcoming rule to deal with that aspect of risk. The tweaking of risk weightings for various asset types is another major change. The NCUA reduced many of the risk weightings, examples of which can be seen in the accompanying table.

Asset Original Risk Weight(s) Updated Risk Weight(s)
Cash at the Federal Reserve 20% 0%
Federal Home Loan Bank stock 50% 20%
Paid-in corporate credit union capital 200% 150%
Current first lien mortgages 50%-100% 50%-75%
Investments in CUSOs 250% 150%

 

The revised rule’s 90-day comment period ends on April 27, 2015. The industry must submit comments with a sense of urgency similar to the initial proposed rule. Comments were key in triggering many changes to the rule, and the NCUA has specifically asked for feedback on areas such as supplemental capital and how the agency should define a complex credit union. The NCUA expects to release its final rule in late 2015, with a proposed implementation date of Jan. 1, 2019.


1,666

The number of credit unions estimated to exist by the start of 2019, when risk-based capital is currently scheduled to be implemented.