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.
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.
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.