Callahan Finds Weaker Q4 Amid 'Remarkable' Year for CUs
Income margins fell and originations slowed for the quarter.
Credit union net income margins fell and originations slowed in the fourth quarter, based on data released Wednesday by Callahan & Associates.
Net income was just under $4.7 billion for the three months ending Dec. 31, resulting in a return on average assets of 0.90% for the fourth quarter, down from 1.09% in the third quarter, but up from 0.83% in 2020’s fourth quarter.
Callahan’s fourth-quarter Trendwatch report found originations for the fourth quarter were $200.2 billion, down 2.9% from the third quarter as consumer lending fell. Originations rose 11.7% from 2020’s fourth quarter as first mortgage lending flattened and consumer lending increased.
While the CU Times quarterly Top 10 analysis of the largest credit unions, published Feb. 2, found their production rose in each quarter of the 2021, Callahan’s data shows that originations fell for all other credit unions for the last two quarters of 2021.
Top 10 ROA also fell in a pattern similar to Callahan’s research for all credit unions, but remained higher than the pack with Top 10 ROA of 1.08% in the fourth quarter, down from 1.38% in the third quarter but up from 0.99% in 2020’s fourth quarter.
However, the Washington, D.C. credit union company’s quarterly Trendwatch webinar focused on results for the year, which Callahan CEO Jon Jeffreys said was remarkable both for credit unions and their members.
For the year, ROA was 1.06%, up from 0.70% in 2020 and 0.93% in 2019.
Membership grew 4.3% to 131.1 million by the end of 2021, compared with 3.2% growth in 2020. It was the largest percentage gain since the 4.4% gain of 2018.
Total loan balances grew 8% to $1.27 trillion in the 12 months ending Dec. 31, 2021. Growth in 2020 was only 4.9%.
“Members are out spending some of the money they saved up during the pandemic,” said Callahan industry analyst William Hunt, who co-hosted the webinar with Jeffreys.
Meanwhile, the savings surge of 2020 subsided. Shares grew 12.7% to $1.81 trillion on Dec. 31, compared with a 20.3% increase in 2020.
As a result, loan-to-share ratios once again surpassed 70%. “It was a really good year for lending,” Jeffreys said.
And member relationships deepened. Average shares per member grew from $12,686 at the end of 2020 to $13,724 at end of 2021. Average loans grew from $8,583 in December 2020 to $8,810 in December 2021.
The percentage of members with a share draft account rose steadily from 56.1% at the end of 2016 to 60.2% in 2020. This year checking account penetration grew again to 61.2%, which Jeffreys said demonstrated members’ greater engagement with their credit unions.
For the year, total originations grew 17.2% to $795 billion, twice the growth rate of loan balances as normal runoff was augmented by heavier member payments.
Jeffreys said the numbers indicate members continue to improve their balance sheets, sometimes to the detriment of their credit unions.
“That’s a good problem to have,” he said.
For the year, first mortgage originations rose 7.5% to $313.7 billion, slowing from 2020’s record 60% gain. First mortgage originations were $79.7 billion in the fourth quarter, up 1.8% from the third quarter and down 0.1% from 2020’s fourth quarter.
Consumer originations rose 21.8% to $386.5 for the year, compared with a gain of 2.9% in 2020. They were $93.1 billion in the fourth quarter, down 9.6% from the third quarter and up 16.2% from 2020’s fourth quarter.