On Wednesday afternoon, Callahan & Associates hosted its quarterly Trendwatch webinar, an analysis of 5300 Call Report data that contextualizes industry performance and showcases strategies to emulate.
The review of first quarter data highlighted several areas in which credit unions are turning out impressive performance. Here are three takeaways from the first day of Trendwatch 1Q 2015:
No. 1: Loan And Market Share Growth
As of first quarter 2015, total loan balances grew 10.6% year-over-year to $731.2 billion from $661.2 billion. The industry originated a record total $89.5 billion, a 20.8% growth rate year-over-year. This was driven by first mortgages originations, which grew 50.8% year-over-year to $26.4 billion, as well as by consumer originations, which grew 12% to $53.9 billion.
In addition to the financial implications, this performance shows that more members are finding value in the cooperative model. This conclusion is justified by the industry’s auto and mortgage market shares. The industry’s auto lending market share of 16.3% matches a post-recession high and is a 10 percentage point increase year-over-year. Credit unions hold 9.2% mortgage market share, well above the 7.1% from 2014, and an all-time high.
“When you consider that market share in auto and mortgage lending are both increasing,” says Sam Taft, industry analyst at Callahan & Associates, “it speaks to the value proposition of the credit union. People are choosing to use credit unions over banks.”
No. 2: Annual Net Liquidity Change Remains Negative
Outstanding share balances continue to grow, by 4.4% year-over-year, representing a $41.8 billion gain. In the first quarter, the industry’s net liquidity flow from shares (= $ quarterly share growth - $ quarterly loan growth) reached $25 billion, as the first quarter is generally a big quarter for shares.
But as the industry’s loan growth continues to outpace share growth (10.6% and 4.4% growth year-over-year respectively), annual net liquidity flow (= $ YOY share growth - $ YOY loan growth) for 1Q15 is -$26 billion. Annual net liquidity flows have been negative since 3Q13, a direct result of loan growth outpacing share growth.
“You need shares to make loans,” Taft says. “If you’re growing loans faster than shares you’re increasingly loaned out. What we’ve seen here is that since 2009 annual net liquidity change has been getting smaller and smaller. There’s an increasing need to get deposits.”
No. 3: Cooperative Practice
In the 90-day comment period after the introduction of the NCUA’s second Risk-Based Capital proposal more than 2,160 comments were filed. Of these, there were more than 1,000 filed by individual credit union members, directors, and employees. There were comments from some 480 credit unions (by name) and Frankenmuth and Verve credit union’s filed the most comments under their names: 83 and 43 respectively.
Additionally, of credit unions with greater than $100 million in assets in the first quarter — those that would need to comply with the proposed rule — just 12 would have fallen below the “well-capitalized” risk-based capital threshold of 10%, less than one percent of eligible institutions. These credit unions ranged in size from $3.7 billion to $100 million. And of these, five fell below the 7% “well-capitalized” PCA threshold for net worth.
17 credit unions have net worth ratios less than the 7% “well-capitalized” threshold, 12 of which have a risk-based capital ratio of 10% or greater.
Trendwatch, Day 2
If you missed today's Trendwatch, you still have a chance to catch it tomorrow. Click now to register for the 11:30 a.m. EST broadcast on May 14.