WASHINGTON — The first quarter of 2015 might have been a weak one for overall GDP growth, but credit unions exhibited strength in a number of areas.
That is the message from Callahan & Associates, which unveiled its quarterly Trendwatch earlier this week.
Chip Filson, Callahan's co-founder and chairman of the board, said credit unions posted 10.6% year-over-year loan growth, 8% capital growth and 3% membership growth in the first quarter of 2015
The credit union community wrote $89 billion in loan originations during the first quarter, with growth in every lending category, according to Filson.
"Credit unions are converting low-yield investments into member loans," he noted.
Despite numerous predictions of a slowdown in mortgages, first mortgage originations during the first three months of the year were up 50.8% from the same period in 2014.
Overall loan balances were up $70 billion year over year, which Filson said will have a "positive impact" on balance sheets. New auto loans were up 21.5% overall, used loans were up 13.3% and credit cards were up 7.7%.
Twenty states had CU loan growth of 10% or higher in the first quarter, topped by Idaho's 23% improvement.
Jay Johnson, executive vice president for Callahan, said CUs increased their national market share in several key categories, including auto lending (16.3% market share — matching the category's post-recession high), credit cards (5.1% — a record high) and mortgages (9.2% — also a record high).
"Credit unions are focusing on member relationships," said Johnson, who noted share growth was up 4.4% year over year, and the loan-to-share ratio was 73.4%. "Share growth is occurring in all the right places. Credit unions are seeing a low cost of funds."
Added Filson, "The growth is largely in core deposits, which have less volatility. Credit unions are ready for a rise in interest rates."
Johnson said credit unions now are the primary financial institution for 54.4% of their members, as measured by active checking accounts. This helped CUs to 6.6% growth in total income, the highest growth in seven years.
Filson said the total income figures showed CUs have the ability to grow income even with stable interest rates.
First quarter ROA was 76 basis points, flat from 78 BP in the same period last year. Johnson said the core lending/savings business is driving growth, but there still is a need for more non-interest income.
"It is an outstanding start to 2015," said Johnson. "Credit unions are on pace for record loan originations and are capturing more market share nationally."
RBC2 Panned Again
One of the hottest topics in credit union land remains NCUA's proposed risk-based capital rule — now in its second incarnation. Filson noted the comment period for what commonly is referred to as RBC2 closed April 27, and drew "unique and unprecedented" member participation.
"This shows the potential for future possibilities for critical rulemaking or legislation," he added.
Callahan figures found 90.7% of credit unions are rated CAMEL 1 or 2, which Filson said shows the industry has "no capital problems at all."
"Only 12 credit unions under RBC2 would be below the 10% 'well-capitalized' level. Of those 12, seven have already been identified — so only five credit unions over $100 million in assets for a rule affecting everybody.
"Hopefully, collective action will result in changes to an unnecessary, burdensome proposed rule," Filson said.