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

What Does PTSD in a Firefighter Look Like? A New Brain Scan Can Show You

Link Post-traumatic stress disorder (PTSD) is often described as one of the invisible scars that firefighters and others accumulate after years of dealing with trauma in their jobs. Now the scars are invisible no longer. A new tool—the SPECT scan—is offering a new way for firefighters and others with PTSD to visualize their injuries. SPECT stands for single photon emission computed tomography, and it creates 3-D scans of the patient’s brain that look at blood flow and brain activity, KTLA reports. Those scans can then be used to generate a treatment plan tailored to the specific patient based on the visual effects of PTSD. Retired Firefighter-Paramedic Matthew Fiorenza, a PTSD sufferer, told the station that the scans also help make the illness more tangible. “Looking at a picture of my brain, it just took the stigma out of it,” he told KTLA. “It’s like, okay, I’m not crazy.”  
Post a Comment
Read Complete Article HERE>»

The Pros and Cons of Tariffs

Since there has been so much discussion on Tariffs, I felt a post would benefit our membership. Grant Sheehan CEO NCOFCU Tariffs 1440 Business & Finance Background A tariff—a word derived from the Arabic arafa, meaning “to make known”— is a tax imposed by a government on goods that are imported or exported . Historically, tariffs have served as a primary source of revenue and a means to protect domestic industries, as they make foreign products more expensive, encouraging consumers to purchase locally produced goods. The tools have a checkered history, famously bolstering US textiles, German steel, Japanese cars, South Korean technology, and more, arguably contributing to major economic downturns like the Great Depression. Tariffs can be specific (a fixed fee per unit) or ad valorem (a percentage of the item's value). Purpose Economically, tariffs aim to protect domestic industries, generate government revenue, and influence trade policy. By imposing taxes on imported goods —wh...
Post a Comment
Read Complete Article HERE>»

Advice On Winning Over Gen Z In ’25

NEW YORK—As 2025 approaches the close of Q1, how can credit unions win over Gen Z? By tailoring credit rewards for a digital-first generation, a new report recommends. Gen Z is reshaping the workforce and redefining financial behaviors. As of 2024, this generation is poised to surpass Baby Boomers in workforce size and will make up 30% of the workforce by 2030. This rapid growth presents a major opportunity for financial institutions to tap into a younger, digitally native audience with distinct spending habits and financial needs, emphasized a GlobalData report authored by Zachary Johnson, specialist, campaign execution & strategy, financial services at VDX.tv. “Unlike previous generations, Gen Z’s economic journey has been shaped by inflation and delayed career starts due to the pandemic and skyrocketing living costs. These factors have made them highly dependent on credit, with Gen Zers being 23% more likely to own a credit card than Millennials at the same age, and carrying...
Post a Comment
Read Complete Article HERE>»

Hauptman Announces Changes to NCUA’s Overdraft/NSF Fee Collection

      Hauptman Announces Changes to NCUA’s Overdraft/NSF Fee Collection WASHINGTON, D.C. (March 3, 2025) – To help ensure credit unions can continue to support the needs of Americans struggling with inflation, the National Credit Union Administration will no longer publish overdraft and non-sufficient fund fee income for individual credit unions, Chairman Kyle S. Hauptman announced today. The NCUA will ...
Post a Comment
Read Complete Article HERE>»

Share Insurance Fund Report Highlights Asset, Income Growth in Q4 2024

      Share Insurance Fund Report Highlights Asset, Income Growth in Q4 2024 ALEXANDRIA, Va. (Feb. 27, 2025) – The National Credit Union Administration Board held its second open meeting of 2025 and received a briefing by the Chief Financial Officer on the performance of the National Credit Union Share Insurance Fund for the quarter ending on December 31, 2024. The Share Insurance Fund reported a net income of ...
Post a Comment
Read Complete Article HERE>»