Third Quarter 2010 Industry Trends For FirstLook Credit Unions

Loan origination, asset quality, and earnings are still the focus of many credit unions.


Callahan & Associates’ FirstLook program is underway with slightly less than 4,000 credit unions, representing $550 billion in assets, reporting. What are the initial trends in the data?

Loan Volume Picks Up In The Third Quarter

Lending remains a critical focus for many institutions. Anecdotally, we’ve talked with credit unions whose pipelines started filling up again during late summer. Data through September 30 shows loans originated in the third quarter were up 15.7% over loan originations for the same group of FirstLook credit unions in the second quarter. Additionally, for FirstLook credit unions originations solely in the third quarter of 2010 were up 3.7% over originations in the third quarter of 2009. Although year-to-date originations remain lower than 2009, largely because of a record level of originations in the second quarter of 2009, credit unions are picking up loan volume through the end of the year.

Average Quarterly Loan Originations for FirstLook Credit Unions
Source: Callahan & Associates' Peer-to-Peer

Asset Quality Trends Remain Stable

Both delinquency and charge-offs have remained stable over the past quarter. Delinquency is up one basis point from the previous quarter to 1.79%. The charge-off ratio is down one basis point from June levels to 1.10%. With an increasing amount in the allowance for loan losses and stable delinquency, FirstLook credit unions’ coverage ratio increased to 92.4% in September from 92.0% in June. For every dollar of delinquent loans, these credit unions have 92 cents reserved for losses prior to touching any other reserves.

Delinquency & C.O. for FirstLook Credit Unions
Source: Callahan & Associates' Peer-to-Peer

Bottom Lines Improving Despite Regulatory Actions

Credit unions’ margin remained relatively stable in the third quarter, increasing two basis points to 3.21%. For this group of credit unions, the third quarter of 2010 marks the third consecutive quarter where the net interest margin has covered daily cost of doing business (operating expenses). The operating expense ratio did increase 10 basis points from June to reach 3.12%; however, the majority of the increase comes from the line item for Member Insurance, where many credit unions have recorded the NCUSIF or CCUSF expenses or accrued for future expenses. The operating expense ratio minus Member Insurance increased just two basis points.

Despite the affects of Regulation E, annual growth of fee income at FirstLook credit unions in September remained positive at 0.6% but has slowed from the 3.9% growth from the previous year. All told, FirstLook credit unions’ ROA increased four basis points from June to 0.43% in September.




Nov. 1, 2010


  • Lydia,

    We continue to see higher real estate delinquency here in California. We don't think real estate delinquency will peak until the State of Calfornia resolves the budget deficits with employee layoffs. We did see some increase in auto and real estate loan volume in August and September. The new opt in rules for debit overdrafts did not reduce that income but in fact is increasig the number of members who use. That happened because we never promoted the service until we had to explain the opt in process.

    Our budget for 2011 anticipates a big drop in debit interchange. Our biggest plus for the bottom line in 2010 was debit interchange due to moving our debit from STAR to Interlink. That move along has added about $170,000 a month in higher interchange net of higher processing expense.
    Henry Wirz
  • Tim - Thanks for the comment. It's been fixed to reflect $550 billion.

    Colin - Yes, fee income remains a concern for many CUs. We have a webinar this week focused on what credit unions have learned after the first 60 days of Reg E changes and how to move forward from here.
    Lydia Cole, Callahan & Associates
  • This kind of insight into trends in the industry is both interesting and useful. Please keep up the good work.

    Despite remaining positive the fee income growth has slowed significantly and must be a concern to many credit unions. I believe that Credit Unions must implement new approaches to deepen relationships with their members.

    Colin Piper,

    President, Econiq Inc
    Colin Piper
  • Check the 550 million....might need to be billion.