3 Takeaways From Trendwatch 2Q 2017

Member, first mortgage, and share growth. How did credit unions perform in the second quarter?

 
 

Credit union membership is growing at its fastest rate ever, first mortgage market share hits a new high, and shares continue to expand, according to second quarter data from Callahan & Associates.

This week, Callahan hosted its quarterly Trendwatch webinar, an event that recaps the industry’s performance trends over the past three months while highlighting credit union success stories and other areas of opportunity.

Here are three Trendwatch takeaways for the second three months of 2017:

No. 1: Membership Growth Posts Fastest Rate Of All-Time

At second quarter, year-over-year credit union membership growth of 4.4% represents the fastest rate all-time. The credit union industry now counts nearly 111 million members.

Membership growth is highest at large credit unions, with those institutions with assets greater than $1 billion posting member growth greater than 10%.

On a quarterly basis, second quarter 2017 represents the largest quarterly member change ever. Credit unions added nearly 1,400 new members from first quarter, a 1.3% quarter-over-quarter growth rate.

To address concerns about the percentage of new members coming from the indirect lending channel, Callahan industry analysts calculated year-over-year member growth less indirect members for second quarter 2017. We found that while total growth hit 4.4%, without indirect members, that growth fell to 3.8%.

No. 2: First Mortgage Market Share Hits New High

At second quarter, credit unions have hit a new high in both first mortgage market share and mortgage originations.

The 8.2% first mortgage market share represents a 90-basis-point increase year-over-year, while the industry’s $67.5 billion in originations is a $4.6 billion increase over the same time period.

Rising interest rates have driven purchasers to adjustable-rate products. Drilling deeper into the mortgage portfolio shows that while originations hit an all-time high in the second quarter, fixed-rate first mortgage products fell to 65.6% (a 3 percentage point drop year-over-year) of the portfolio. Balloons, meanwhile, rose to 22.9%, and have more than doubled as a share of the origination pie since the second quarter of 2013.

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No. 3: Shares Continue To Expand In The Second Quarter

The 8.2% year-over-year share growth posted at second quarter represents the fastest second quarter share growth since the Great Recession. Share balances have now reached more than $1.1 trillion.

In addition, all 50 states posted quarterly share growth in second quarter, headlined by Maine, Colorado, Oregon, and Idaho, all of which posted rates at or greater than 8.5%. Regionally, the NCUA’s Western Region grew share balances at the fastest pace.

Also of note, credit union share certificates grew 4.7% year-over-year, a 1 percentage point increase from second quarter 2016 performance. One possible explanation: loan growth has outpaced share growth for the fifth straight year, and as credit unions look to gain liquidity they are turning toward one-time special rates on products such as CDs.

In concert with rising interest rates, credit unions have posted an increase in interest income. The industry’s interest income/ average assets ratio of 3.46% at second quarter represents a 3 basis point increase year-over-year.

 
 

Aug. 23, 2017


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