End-of-Year Numbers Show a Renewed Focus on the Member-Owner

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Based on December 31, 2013 data provided by Callahan & Associates, credit unions have surpassed lending records by hitting the $345 billion mark in loan originations.

'It’s important to remember the consistency and reliable source of credit given to members,' Johnson says.

Every quarter, Callahan & Associates hosts a review of credit union performance that gives context to the industry’s successes and challenges. Trendwatch attendees walk away with an understanding of the industry’s role in the larger sphere of financial services, as well as strategies to strengthen their own position in the credit union market. Callahan EVP Jay Johnson and chairman Chip Filson hosted the first of two webinars on Tuesday, Feb. 18. Scott Gilbert with Goldman Sachs Asset Management and Patti Barrow, CEO of Erie Federal Credit Union, also joined the call.

Lending Reaches $345 Billion, Highlighting an Increase in Consumer Confidence

As of December 31, 2013, credit unions have surpassed lending records by hitting the $345 billion mark in loan originations. Consumer lending leads the way in originations with an 8.5 percent increase from 2012 with primarily auto and credit card representing the positive growth. Member business loans have increased about $2 billion and even home equity loans are up about $3 billion, reflecting the strength gathering in the housing market. With interest rates increasing in the second half of 2013, first mortgage originations did begin to decline after showing growth it the first half of the year. Credit unions still captured just less than seven percent of the market.

A Focus On Member-Owners

Credit unions are distinguishing themselves from other financial institutions and communicating their cooperative impact. Educators Credit Union ($1.4B, Racine, WI) saved members $16.4 million in 2013 and more than $88 million since 2008 through its Fast Lane Financing program. Credit unions have made more than 125 million loans since 2008 and originated 25 million loans in 2013 alone, further emphasizing an increase in consumer confidence.

“It’s important to remember the consistency and reliable source of credit given to members,” Johnson says. “The value is coming through at an individual level as shown with Educators financing program and also at the system level with partnerships in CUSOs.

Risk-Based Capital

As the discussion surrounding the NCUA’s risk based capital rule intensifies, the camps in support and dispute will grow in number and in volume. Using Callahan & Associates’ Peer-to-Peer analytics, Johnson and Filson discussed five years of ratio data, showing how the credit union strategy remains financially strong and well capitalized and has been so since fourth quarter 2008. According to three different metrics — the risk-based capital ratio, the capital ratio, and the net worth ratio — credit unions currently exhibit 15.5%, 11.3%, and 10.7% capitalization levels, respectively.

Filson believes NCUA’s new proposed individual minimum capital requirements might inhibit long-term planning at credit unions because the regulator can alter capital levels based on its subjective judgment as opposed to a rigid mathematical formula or wholly objective criteria.

A recording of the Trendwatch webinar is currently available on CreditUnions.com. Watch it now at http://www.creditunions.com/video/trendwatch-4q-2013/.

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About Callahan & Associates
Callahan & Associates is an independent voice within the credit union industry providing trusted industry expertise to drive credit union prosperity.

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Carissa Heckathorn
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