First Quarter Results Point to Credit Union Opportunities in 2007

Recent headlines about non-prime mortgage programs, credit cards and student loans accentuate the enormous opportunities for credit unions in today’s market.

 
 

This month Sen. Charles Schumer of New York introduced a bill that would require mortgage lenders to “act in the interest of borrowers.” Credit union leaders must find it ironic that legislation is needed for something that their industry does every day. In fact, recent headlines about non-prime mortgage programs, credit cards and student loans accentuate the enormous opportunities for credit unions in today’s market. Evidence that credit unions are realizing some of these opportunities is apparent in first quarter results. Highlights of the first quarter include:

Shares

  • Members directed an additional $25.6 billion in new shares to their credit unions in the first quarter of 2007. While certificates accounted for virtually all of the gains in 2006, the first quarter saw increases in all deposit categories.
  • Dividend payments rose 38 percent versus first quarter 2006. Over the past 12 months the cost of funds has jumped 71 basis points, the fastest jump in that timeframe in over a decade.

Loans

  • The $506.6 billion loan portfolio rose by just $1 billion during the first three months of the year, compared to a $4.5 billion rise in first quarter 2006. Lending activity has not materially slowed however. The difference is that refinancing activity is a larger proportion of loan originations this year.
  • Despite a slowing housing market, credit union first mortgage activity remains solid. First mortgage balances are up $3.3 billion in the first three months of 2007 with origination volume of $12.1 billion up slightly vs first quarter 2006.
  • The auto market slowdown can be seen in auto loan balances, which declined slightly in the first three months of the year to $178.7 billion.
  • Credit card balances are up 12.5 percent over the past year, reaching $26.4 billion as of March 31.

Net Income/Capital

  • Income before dividends jumped 24.5 percent versus first quarter 2006, but net income declined 5.9 percent as credit unions raised member dividends.
  • Capital levels remain strong with an 11.3 percent industry net worth to assets ratio as of March 31.

The strong balance sheet is just one aspect of credit unions’ advantageous position in the market today. In an environment where daily headlines remind consumers of the financial traps that are prevalent in the market, credit union values can provide a real competitive advantage. Ensuring the market sees, hears and recognizes that value will be the key to credit unions realizing the opportunities in 2007.


 

 

 

May 28, 2007


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