Offsets May Overshadow Growth
When it comes to loan originations, it appears credit unions are seeing a glimmer of hope in their portfolios.
Callahan & Associates recently reported that the country’s nearly 7,400 credit unions increased lending by 8% in the first half of 2011. The firm said mid-year marked the fourth consecutive quarterly rise in total loan originations. Comparing the first six months of 2011 to the same period in 2010, Callahan said consumer loan originations increased by 10%. First-mortgage volume grew 7.3% during the same time.
Meanwhile, Turner said despite seeing marginal spreads eroding this year, earnings have improved over the past two quarters, increasing from about 0.50% in 2010 to an estimate of 0.75% in 2011. Still, eroding marginal spreads have been offset by declining delinquencies and net charge-offs during the first half of the year accounting for about 25 basis points of the earnings improvement, he added, saying slightly lower net operating expense accounts for the rest.
Filson said even though first-mortgage volume has grown, credit unions continue to sell 45% of their production volume to the secondary market. When the Federal Reserve recently said it would keep rates low for two years, it opened the door for credit unions to provide “a unique opportunity to expand balance sheet loans and increase margins due to the stable funding outlook for short-term deposits,” according to Filson.