With each new press release, NCUA moves the foundation on which decisions are supposed to be made. What NCUA originally estimated at $4.7B in January, has now morphed into a $5 to 10B estimate today! Is capital impaired or lost altogether? An uncertain foundation can wreak havoc on a credit union’s ability to plan.
So what’s the point in data and benchmarking? A lot, actually. Unlike NCUA’s constantly moving targets, the industry has solid numbers to stand on and build an actionable base to work from.
Let’s start at the top. In 2008, loans grew 6.7%. Shares were up 7.0%. But that’s not enough detail. Credit unions need to drill down to find out where that growth is coming from, the potential dangers lurking around the corner and areas of opportunity. Let’s take a look at 5 charts that illustrate how a deep dive into the numbers can help you make decisions going forward.(All data used in this analysis is from year-end 2008.)
1. The Credit Union Loan Portfolio
First we look at the entire industry’s loan portfolio to get a sense of where credit unions are putting most of their time and effort. As you can see, mortgage lending now makes up more than 50% of the total loan portfolio—a potential area of opportunity as members look to refinance and a potential area to keep an eye on with default rates still rising.
2. Peer Group Loan Portfolio Composition
The total portfolio is heavily influenced by the larger credit unions that have larger mortgage portfolios. As you can see from the above bar chart, it’s not until credit unions reach $100M in assets that the loan portfolio shifts to over 50% in mortgage. Up until then, credit unions typically have a larger concentration of auto and other unsecured loans.
3. State Level Comparison Of The Mortgage Portfolio
Mortgage lending is made up of a lot of different products, and depending on geographic region certain products were more popular with members. As the above chart shows, in Texas members preferred (or credit unions more readily offered) fixed rate first mortgages. In California, there is a larger concentration of hybrid/balloon first mortgages. A contributing factor in this difference is median home price in each state.
4. First Mortgages Sold On The Secondary By Peer Group
What the portfolio charts don’t show us is total origination volume as well as how many of the loans have been sold on the secondary market. As you can see above, larger credit unions sell a larger percent of their 1st mortgage originations than smaller credit unions. However the trend varies by peer group with the smallest and largest credit unions selling a higher percent since 2007, and the middle peer groups holding more in portfolio.
5. Mortgage Delinquency By Peer Group
This could leave smaller credit unions more vulnerable to rising delinquency. For credit unions concerned about this, understanding what works in the area of loan modifications is important. This is a topic covered extensively on CreditUnions.com over the past few weeks.