Preliminary First Quarter Data Indicates Borrowings Rise Significantly

As loan demand remains solid, credit unions are actively managing their liquidity. Borrowings are on the rise, up 74.1% over the past 12 months among credit unions participating in Callahan & Associates’ First Look program.

 
 

As loan demand remains solid, credit unions are actively managing their liquidity. Borrowings are on the rise, up 74.1% over the past 12 months. In the First Look group of credit unions, total loans grew by 8.7%, exceeding the share growth rate (5.1%). For credit unions with outstanding borrowings, loan growth (11.1%) almost doubled share growth (6.0%). This resulted in a loan to share ratio of 92.6%, up from 87.2% in the first quarter of 2007 with outstanding borrowings. Shares increased $16.2B over last year while loans increased $18.6B over the same time period. Increased loan demand may have prompted the $6.8B increase in borrowings from credit unions looking to maintain liquidity and others taking advantage of the flat yield curve.

First mortgage originations for credit unions participating in Callahan's First Look program increased 63.3% over last year at the same time. Credit card loans increased 20.4% over the first quarter of 2007. New auto loans were down 3.8% and used auto loans were up 2.9% over last year at the same time.

There has been a shift in the remainder of the borrowing portfolio over the past year as credit unions took advantage of a flat yield curve to extend their borrowings. Borrowings maturing in less than one year decreased by 6.7 percentage points among the First Look credit unions over last year from 36.0% to 29.3%. Borrowings maturing in one to three years increased to 26.9% of the portfolio from 21.7%. The proportion of borrowings held more than three years increased slightly, shifting from 42.3% of total borrowings at 1Q 2007 to 43.8% of total borrowings at 1Q 2008.

Overall, outstanding borrowings represent 6.1% of the First Look credit union's total liabilities. Although credit unions still have ample liquidity, a long-term borrowing strategy is an important factor for credit unions to consider as they respond to a changing market and member needs. For many credit unions however, liquidity is not the issue. "We have liquidity" says Ralph Reardon, CFO of Coastal Federal Credit Union ($1.9B in Raleigh, NC), "but borrowing plays into our ALM interest-rate risk strategy."

 

 

 

May 19, 2008


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