3 Takeaways From Trendwatch 4Q 2014

The combination of balance sheet dynamics, membership preference, and marketplace performance has the credit union industry primed for growth in 2015.

 
 

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 fourth quarter data highlighted several areas in which credit unions are turning out impressive performance; here are three:

No. 1: Financial performance at cooperatives strong by any measure.

Indicators of financial performance at credit unions are growing across the board, some areas by record measures. Here’s a few of the highlights from year-end data as of December 31, 2014:

  • Total loan originations grew 1% year-over-year as total loan balances grew 10.5%, up to $721.6 billion
  • Led by core deposit products — i.e. checking and savings accounts — total share balances increased 4.6% year-over-year. Checking and savings account balances grew 8.5% and 10.3% year-over-year, reflecting strong relationships
  • Due to higher interest income, net income has reached a post recession high of $8.9 billion
  • The current credit union net worth ratio is 11%. Cooperatives maintained strong capital levels before, during, and after the Financial Crisis, as its net worth ratio never fell below 9%.

No. 2: Member value continues to increase.

Members continue to find value from their credit union relationships, indicated by rising industry penetration rates. This performance suggests members believe the cooperative model offers greater value vis-à-vis other financial relationships.

Checking account penetration has reached 54% from 46.7% in 2009. More members are turning to credit unions as their primary financial institution. Additionally, the average member relationship has increased by 3.7% year-over-year, to $16,323.

The credit card penetration rate of 16.6% is up from 14.4% in 2009, and while an auto penetration rate of 17.7% is up from 17.1% in 2009, the rate was as low as 15.9% in as recent as 2011. Taken together, this performance shows how well the steps the credit union industry has taken to deepen existing memberships have succeeded.

No. 3: Credit union marketplace momentum.

Based on year-end data, the credit union industry made strides in 2014 increasing its market share in several large areas of the balance sheet. Auto lending market share hit a post recession high of 16.3%, up from the 15.1% posted in 2010. Credit card market share rose as well, to 5.3% from 3.9% in 2009.

The 8.4% first mortgage market share is a new annual high for the credit union industry, up from a 4.5% market share in 2009. In more than 10 metropolitan statistical areas, including Binghamton, NY, Lafayette, IN, Cumberland, MD-WV, and Burlington-South Burlington, VT, credit unions are capturing at least 30% of the mortgage market share.

And while many of these figures best record performance, U.S. economic performance and credit union liquidity foreshadow 2015 as a year for significant potential growth.

In December, the U.S. unemployment rate hit 5.6%, down from the 6.7% seen a year ago. Also in December, consumer spending grew 4.3%. A combination of factors such as plunging oil prices and strong job growth has bolstered consumer confidence.

In the credit union industry, while short-term liquidity as a percentage of total investments (cash and cash equivalents + investments < 1 year) is lower than it was in the first quarter of 2009, the total dollar amount is slightly higher. That liquidity coupled with the Federal Reserve’s impending interest rate hike announcement positions credit unions well for future loan activity.

 
 

Feb. 18, 2015


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