No Slowdown in Mortgage Activity in Third Quarter

After a strong quarter of mortgage originations in spring 2003 and an uptick in rates to begin the third quarter, many expected the mortgage boom to falter. Had the drop off occurred, credit unions would have felt a squeeze on their ROA, given today's low interest rates and the influx of service revenue provided by mortgage originations.

 
 

After a strong quarter of mortgage originations in spring 2003 and an uptick in rates to begin the third quarter, many expected the mortgage boom to falter. Had the drop off occurred, credit unions would have felt a squeeze on their ROA, given today's low interest rates and the influx of service revenue provided by mortgage originations.

Preliminary third quarter numbers are here, and it is apparent that the mortgage boom did not falter in the third quarter. The early aggregate statistics merely confirm what many credit unions individually experienced this summer - sustained growth in mortgage originations, no fall off in service income, and stable ROA.

The table below provides a quarter-by-quarter look at the past year. The data in the table is from third quarter 5300 call reports of 758 credit unions, making up about 27% of total industry assets, submitted to Callahan & Associates' First Look Program.

Comparing these credit unions' third quarter with that of third quarter 2002, quarterly mortgage originations have grown substantially. Credit unions' $9 billion in third quarter 2003 mortgage originations was $2.1 billion more than second quarter 2003, and over double third quarter 2002. Service income also stayed strong, growing from 1.06% of average assets one year ago, to 1.20% of average assets in third quarter 2003. Quarterly ROA is not the 1.25% it was one year ago, but it remains positive and relatively steady at 1.11%.

 

 

 

Nov. 10, 2003


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