First quarter data for credit unions is rolling out, and so far the trends are impressive. According to Callahan’s FirstLook program, which includes more than 45% of the industry, credit unions posted the highest first quarter loan originations on record and accelerated their outstanding loan growth on the balance sheet. The Bank Transfer Day momentum continued into the New Year as shown in the increase in member and share growth from fourth quarter’s record levels. Most importantly, credit unions achieved a historic milestone: Sometime in early March, a member deposited funds with their credit union, pushing the industry’s balance sheet to top $1 trillion.
The number of net new members reported by these credit unions for the first three months of 2012 exceeded fourth quarter 2011, which was itself a record quarter. FirstLook credit unions posted a 2.1% net new member growth since the first quarter of 2011. That’s up from last quarter’s 1.7%. But they didn’t just join, credit union members brought their funds with them. Shares increased year-over-year 7.1%, up from December’s level of 5.7%. Regular shares and share drafts both posted double-digit growth. The number of checking accounts increased 7.9%, a three-percentage-point jump from December.
Members Savings Fuel Record First Quarter Loan Originations
Using those deposits, credit unions offered refuge to credit -seeking members and posted the highest volume of first quarter loan originations on record. First quarter origination volume for FirstLook credit unions is up 26% from the first three months of 2011. First mortgage originations comprised 34.2% of the total loan volume. Credit unions sold 50.4% of those originations to the secondary market, in addition they hold twice the amount of Loans Held for Sale that they reported in the first quarter of 2011. Even with the sales, credit unions posted growth in the amount of loans outstanding. Loans on the balance sheet increased 2.5% from March 2011 levels, an accelerated growth from December’s 1.3%. Consumer originations as a percentage of total loan volume, however, is down both quarterly and annually. After peaking at 63.4% in September 2011, it dropped to 55.6% during first quarter 2012.
Asset quality has improved from December levels. Delinquency is down 16 basis points to 1.42% and the charge-off ratio, which traditionally increases from the fourth to the first quarters, dropped 10 basis points to 0.85%.
Total Income Increases, Provisions Decline Lead To Strong ROA
The net interest margin dropped 15 basis points from 3.24% in December to 3.09% through March. Credit unions are earning lower interest income thanks in part to members paying down higher-rate loans and credit unions making new loans at lower rates. Despite this challenge, total income for FirstLook credit unions is up 62 basis points. That minor increase is attributable to other operating income, which includes mortgage banking activities. The last time credit unions posted positive year-over-year growth in total income was September 2009.
With positive growth in total income and improving asset quality (leading to a 20.2% drop in year-to-date provision expenses), earnings are a high point for FirstLook credit unions. They posted an annualized year-to-date ROA of 0.87% after stabilization expenses, up 20 basis points from December’s level of 0.67% and up 11 basis points from the previous March.
With a strong bottom line, reserves increased. The capital ratio for the industry stands at 11.1%, which is unchanged from the previous March due to a similar rate of growth in assets.
The industry data shows tremendous financial performance in the first quarter. Now how will credit unions capitalize on this momentum and their $1 trillion balance sheet throughout the rest of the year?