The Quarterly Report: 3Q10

Credit unions can draft big plans for 2011.


From double-digit percent increases in November auto sales to a six-month high in mortgage applications, opportunity abounds for the credit union industry to pass on liquidity to consumers throughout the New Year. 

Credit unions increased stability and prosperity throughout 3Q 2010, not at the expense of consumers but in the very act of supporting them. Cooperative financial activity has set the stage for record activity going forward.

Goldman Sachs on Wednesday revised its forecast for the U.S. economy, setting the first upbeat tone in quite some time. The banking investment and securities firm predicts the current uptick in business hiring will lead to a decline in unemployment by the end of 2012 and real GDP growth will hit 2.7% for the year. The unexpected strength in third quarter performance and firmer domestic demand, “is being led largely by the consumer,” says John Olivo, senior fixed income portfolio manager for Goldman.

While many financial institutions now flush with cash play close to the belt with lending activity, even tightening restrictions on some activities such as mortgage lending, credit unions posted their highest 3Q quarter lending activity in five years. Credit unions originated more than $1 billion dollars in loans per business day this quarter, with competitive rates that provide a lifeline for recovering members.

Much of the industry’s record-setting mortgage originations this quarter comes from aggressive refinancing, making historically low rates accessible to the consumers who need debt reduction the most.

Deleveraging assistance has proven not only beneficial for the member but for the institution as well. Credit unions posted roughly $3 billion in net income this quarter, up an astounding 80% from the year before.

The industry strengthened its balance sheet, with more than a $1 billion of capital gained through proactive adaptation in management leadership, says Callahan & Associates’ CEO Chip Filson.

Rather than competing directly with large banks and other financial institutions, credit unions rely on their different structural design and grassroots sensitivity to adjust their business model according to the needs of their local economies, Filson says. Whether in auto funding, mortgage purchase and refinance activity, or credit cards, credit unions focused more on meeting the needs of consumer in ways other institutions cannot. In doing so, the industry has positioned itself strategically for the vast opportunities ahead in a recovering marketplace.

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