Skip to main content

5 Takeaways From CALLAHAN & ASSOCIATES Trendwatch 1Q 2024 - Asset quality, liquidity, and revenue are all on the minds of credit union leaders. Here's what the data has to say about that and more.

 

5 Takeaways From Trendwatch 1Q 2024

Asset quality, liquidity, and revenue are all on the minds of credit union leaders. Here's what the data has to say about that and more.

Credit unions reported record revenue in the first quarter, but delinquency is still up and loan originations are down. Is the industry ready for the year ahead? First quarter data offers a window into what might happen in the year to come.

Takeaway 1: Delinquency Ticked Down

DELINQUENCY BY PRODUCT
FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.24
© CALLAHAN & ASSOCIATES | CREDITUNIONS.COM

  • Delinquency remained elevated in the first quarter, although it fell slightly from its peak in the fourth quarter. Higher interest rates have made it more difficult for Americans to keep up with loan payments, particularly for credit cards. Americans are putting more purchases on credit and missing payments because of it, and credit unions are bracing for more charge-offs.
  • Notably, delinquency is concentrated in just a few categories. Delinquency in new auto and residential real estate, for example, has not jumped like in credit cards. 

 

Takeaway 2: Provision Expense Growth Slowed

QUARTERLY PROVISION FOR LOAN & LESS LOSSES
FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.24
© CALLAHAN & ASSOCIATES | CREDITUNIONS.COM

  • Deteriorating asset quality pushed credit unions to stock up on provisions the past few quarters to guard against future losses. In the first quarter, however, credit unions added $3.2 billion in provisions — a drop from the $3.9 billion added in the fourth quarter of 2023 but still well above the $2.2 billion added in the first quarter of 2023.
  • The increase in PLL has dragged down ROA, which dropped from 0.81% in the first quarter of 2023 to 0.66% one year later.

 

Takeaway 3: Credit Unions Were Less Reliant On Borrowing

BORROWING TO ASSETS
FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.24
© CALLAHAN & ASSOCIATES | CREDITUNIONS.COM

  • With a loan-to-share ratio of 82.7%, credit unions are feeling the liquidity pinch.
  • Borrowing as a percentage of assets increased throughout 2023 as the strategy became a viable alternative to share growth to raise liquidity. However, borrowing is getting more expensive. In the first quarter, the cost of borrowing reached 5.31%, and borrowing dipped slightly.
  • Instead, cash from maturing investments became a more alluring option to boost liquidity. In the first quarter, cash as a percentage of assets reached 9.32%.

 

Takeaway 4: Higher Interest Rates Suppressed Originations

YEAR-TO-DATE LOAN ORIGINATIONS
FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.24
© CALLAHAN & ASSOCIATES | CREDITUNIONS.COM

  • The pinch of high interest rates forced credit union members to pull back on borrowing in the first quarter. With 30.1% fewer loans made than one year ago, credit unions originated only $113.6 billion — the lowest first quarter origination total in five years.
  • This marks the second straight year of sizeable declines; however, the slowdown in real estate mortgage originations ebbed slightly. It fell 9.0% year-over-year, a stark comparison to the 49.5% drop one year ago.

 

Takeaway 5: Revenue Continued To Climb

TOTAL REVENUE
FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.24
© CALLAHAN & ASSOCIATES | CREDITUNIONS.COM

  • Despite the slowdown in loan originations, revenue at credit unions expanded 18.6% year-over-year in the first quarter. Cooperatives capitalized on higher loan yield, and income from loans jumped $22.7 billion. Investment income also climbed 30.2%, a sign that investment securities are repricing at higher rates. All of this means a better starting point for credit union earnings.
  • Revenue rose in the first quarter, but so did operating, interest, and provision expenses. Subsequently ROA fell despite the bump in revenue. Keep an eye out for the remainder of 2024 to see how credit unions take advantage of this revenue boost while weathering headwinds.

Comments

Post a Comment

Please no profanity or political comments.

Popular posts from this blog

Mortgage Rates See Biggest Decline in a Year; Applications Rise

WASHINGTON–Mortgage rates saw the biggest one-week drop in over a year last week, causing the first increase in mortgage demand in a month, according to new data. Total mortgage application volume rose 2.5% last week, compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 7.61% from 7.86%, with points falling to 0.69 from 0.73 (including the origination fee) for loans with a 20% down payment. The Rate Driver "Last week's decrease in rates was driven by the U.S. Treasury's issuance update, the Fed striking a dovish tone in the November FOMC statemen
Post a Comment
Read Complete Article HERE>»

Growing Delinquencies, Especially in Auto Loans, Can be Seen in New CUNA Report

MADISON, Wis.–Ongoing increases in delinquencies, especially in automobile loans, can be seen in the new CUNA Economic Update . According to CUNA Chief Economist Mike Schenk, the report shows: Mortgage delinquencies. With data obtained by Equifax, CUNA economists said they have found “slight upward movements” in mortgage delinquency rates.   Credit card delinquencies. Bigger increases in delinquency rates relative to the cyclical low – as seen during the COVID-19 pandemic – is concerning, said Schenk.   Auto loan delinquencies: Data shows a “dramatic” increase in delinquency rates among institutions such as auto financing companies.  CUNA Forecast   CUNA’s economists are forecasting delinquency rates will peak at 1% by the end of 2024.
Post a Comment
Read Complete Article HERE>»

Speakers & Sessions For NCOFCU 24 San Antonio TX.

National Council of Firefighter Credit Unions Inc (NCOFCU)  Speakers and Schedule! It is the National Council of Firefighter Credit Unions (NCOFCU) "GO TO Conference" for credit unions serving first responders! Who should attend? CEO's, VP's Directors and Staff See What's Planned Register Here! Bring your spouse, bring a guest to enjoy San Antonio, TX River Walk 4 Days Golf 16 + Sessions Alamo Reception Closing Dinner Right on the San Antonio River Walk Several Networking events Open Forums Idea Exchange Events Panel Discussions of CU Leaders National & Industry Speakers Trends in First-Responder Credit Unions Director & Volunteer Sessions Exhibitors ShowcaseAnd  So Much More! HOTEL REGISTER HERE
Post a Comment
Read Complete Article HERE>»