4th Quarter Data Shows Credit Unions Becoming Aggressive

Through the financial services storm, credit unions aren’t just putting up umbrellas—they are taking on the wind.


When analyzing Callahan First Look year end 2007 data (288 credit unions participating - totaling $244B in assets), one thing stands out on the balance sheet.  Credit unions are becoming aggressive. This is visible in four different areas of the First Look Balance Sheet.

Notes Payable are up 92% over year end 2006. Credit unions are leveraging their balance sheets. With rates falling, credit unions are able to get long term funding to match duration of assets.  In some cases, it is less expensive to access wholesale funding than to get new deposits from members. To borrow funds and leverage the balance sheet, credit unions are trying to stregthen their balance sheet and add menber value. 

Real Estate Loans have increased almost 16% since year end 2006. Credit unions are seeing the opportunity to manage their portfolio rather than to sell to the secondary markets.  As other lenders have left the market, credit unions have gained market share.

Other Loans are up 11.6%. These loans mostly consist of credit cards and signature loans and are generally the highest yielding assets, helping credit unions maintain a positive net interst margin. 

New Branches increased 8.5%. Branches in some ways may be the longest assets credit unions invest in.  For most credit unions, branches do not become profitable for 3-5 years.  Credit unions are continuing to expand their footprint and invest in their futures. 

These data points show credit unions are remaining agressive.  While earnings may be tight in 2008 becuase of the increasing problems with credit losses, most credit unions have adquate capital to weather the storm.  The leading credit unions are managing through the cycle of slow growth and potential credit losses by focusing on adding member value, which can take a long term approach and position credit unions for future growth.

Achieve growth by becoming aggressive in 2008. At the Financial Solutions Symposium this Spring, join your credit union peers and industry leaders to focus on the ‘rare opportunity’ for credit unions in the credit crunch. The Financial Solutions Symposium will feature case studies, credit union panelists, the latest industry data, and industry leaders. In its 5th year, the conference is being held in Orlando, Florida on March 25-27, 2008. Contact Ryan Sherwin (202-223-3920) for details.

View First Look data and receive analysis of fourth quarter data by submitting your 5300 Call Report to Callahan. Contact Yvonne Lee (202-223-3920) for details.