3 Takeaways From Trendwatch 3Q 2017

Member-first, not bank-lite. How did credit unions perform in the third quarter?

 
 

Credit unions continue to show how a member-first focus, not a bank-lite approach, drives growth, pays dividends, and provides value.

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 third quarter of 2017:

No. 1: Loans Post Fourth Year Of Double-Digit 3Q Growth

At third quarter, credit unions are closing in on $1 trillion in loans held. Year-over-year loan growth hit 10.6% in the third quarter, which represents the fourth consecutive year of double-digit third quarter loan growth.

 

 

Year-to-date loan origination volume remains at record levels, at $365.4 billion, while third quarter originations set their own quarterly record, at $125.7 billion.

Of note: Credit union share growth remains positive, but the pace has slowed compared to previous quarters leading to the sixth consecutive year where loan growth outpaces share growth. This mismatch in growth rates has led to a decline in total investment balances as credit unions search for additional sources of liquidity.

No. 2: First Mortgage Originations Surpass $104.4 Billion

At third quarter, credit unions have driven loan growth largely through an uptick in first mortgage originations, which reached $104.4 billion.

First mortgages compose 40.8% of the credit union loan portfolio, the largest such concentration.

However, as interest rates are set to rise, the types of credit union first mortgage originations have evolved. Fixed-rate originations dropped 3.6 percentage points to 66.4% of originations, its lowest total since fourth quarter 2014. In its stead, balloon and ARM originations rose 2.7  and 0.9 percentage points, respectively, underscoring credit union's willingness to lend to member need.

Catch Up On 3Q 2017 Trendwatch

This must-attend quarterly event for credit union leaders covers performance trends, industry success stories, and areas of opportunity. Attendees will find insight they won't find anywhere else weeks before the official NCUA data release.

Watch Now

No. 3: Credit Unions Are Member-First, Not Bank-Lite

Comparing credit unions and banks across several third quarter performance metrics reveals disparity between the two major financial service providers. Here's a quick breakdown:

CREDIT UNION AND BANK PERFORMANCE COMPARISON

FOR ALL U.S. CREDIT UNIONS AND BANKS | DATA AS OF 09.30.17
© Callahan & Associates | www.creditunions.com
  Credit Unions in U.S. All Banks in U.S. Community Banks in U.S.
Annual Loan Growth 10.6% 3.5% 7.3%
Annual Deposit Growth 6.8% 4.0% 2.5%
Delinquency Ratio 0.79% 1.20% 0.88%
Average Assets $242.0M $3.0B $420.0M

Source: Callahan & Associates.

2017 Callahan & Associates, Inc. All rights reserved

Yet, while credit unions are growing faster than their bank counterparts, they are designing member-first services rather than co-opting a fee-first, bank-lite model.

Examples include Langley Federal Credit Union's ($2.5B, Newport News, VA) Essential Checking product, which is designed for members who have not previously qualified for checking or are just starting to build their credit; Pioneer Federal Credit Union's ($442.6M, Mountain Home, ID) Credit Score Analysis program, which focuses on raising member scores; and Summit Credit Union's ($2.9B, Madison, WI) Cash Boomerang program, a dividend payout that's helped members earn more than $2 million.

 

Nov. 28, 2017


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