Live and Loan

The last three months of 2010 broke records and set the pace for a promising 2011.


After making big plans for 2011, the industry has entered the year with decisive momentum. The external economy burns bright; unemployment rates are improving more than they have in nearly 28 years and existing home sales and auto demand signal the return of the borrower.

Goldman Sachs has forecast 4% growth by the second quarter of 2011 and on through early 2012 in Callahan's 4Q Credit Union Strategy and Performance (CUSP) guide. All roads lead to the same destination: consumer confidence is back, and credit unions have the liquidity necessary to stoke the recovery fire.

According to Callahan’s Peer-to-Peer software, the credit union system originated $69 billion in loans during fourth quarter 2010; that's the highest fourth quarter originations in the industry’s history. Improvements in financial performance reach across the board and include areas such as member business and consumer lending. Cooperatives steadily gained steam throughout 2010, as evidenced by the 25% increase in originations during the second half of the year over the first half of 2010.

Lending activity remains a vital focus in 2011, and closer inspection of the behaviors and factors that contributed to the $8 billion drop in loans outstanding during fourth quarter spotlight outstanding strengths.

The industry sold more than 50% of mortgages originated to the secondary market. This is good for asset and liability management even if it skews the balance sheet. According to the Mortgage Bankers Association, more than 70% of total mortgage volume in the market was refinance; however, many cooperative's re-fi levels were closer to 80% of total originations. So even though credit unions originated record amounts in the fourth quarter, not all those originations made their way to the balance sheet.

The activity, however, still helped greatly reduced the average debt load for American families. And that's not where the grassroots stimulation stops. When members save on borrowing costs it creates a pickup in consumer lending, a pickup in small business, and a pickup in home equity.

Auto lending is another factor behind the balance sheet dip. New auto lending contributed to the 5.3% annual decline in the total portfolio; however, used auto lending increased 3.4% during the same period. This activity signals the return of captive financers and other competition to the market. Used auto, first mortgage, credit card, and business lending were all on the rise during fourth quarter, which indicates the maneuverability with which the industry can adapt and respond to new opportunities in the lending arena.