Callahan Shows Sharp Drop in Q3 Earnings for Credit Unions
Its "Trendwatch" report finds savings and loan originations fell from June.
Data from Callahan & Associates showed credit union earnings and loan originations fell sharply in the third quarter.
Higher provisions for loan losses were the main culprit as delinquencies rose.
In the three months ending Sept. 30, credit unions earned about $3.7 million, or an annualized 0.67% of their average assets in the period, down from 0.94% a year earlier and 0.77% in the second quarter.
The results were similar to those CU Times reported Nov. 1 based on its analysis of NCUA Call Reports for the nation’s 10 largest credit unions. Third-quarter ROA was 0.64% for the Top 10, down from 1.00% a year earlier and 0.87% in the second quarter.
During Callahan’s quarterly “Trendwatch” webinar Tuesday, it presented data that shows total originations for the three months ending Sept. 30 were $142 billion, down 28% from a year earlier and down 4.4% from the second quarter.
The third-quarter originations were 6.3% of average assets, down from 9.1% a year earlier and far below pre-pandemic years. The ratio was 9.2% to 9.8% for third quarters from 2017 through 2019, before rising above 10% in 2020 and 2021.
Real estate originations were $52 billion in the third quarter, down 32% from a year earlier and up 10% from the second quarter.
Non-real estate originations were $89 billion in the third quarter, down 28% from a year earlier and down 11% from the second quarter.
However, credit union’s loan balances grew. Loans stood at $1.60 trillion on Sept. 30, up 9% from a year earlier and up 1.8% from June, but the growth rate was down from 19% for the 12 months that ended September 2022.
Callahan CEO Jon Jeffreys said that although loan growth was slowing, it was still able to show a sizeable gain because runoff also slowed, helping to offset lower originations.
“A lot of consumers and members really aren’t paying down loans,” Jeffreys said. “If you have a 3% mortgage or a 2% car loan, you’re probably not going to pay that down as fast as you were in other environments.”
Meanwhile, Callahan data showed that savings fell 0.1% from June 30 to Sept. 30, a finding similar to CUNA, which showed a 0.2% decline. For the 12 months ending Sept. 30, Callahan showed savings rose 0.9% to $1.90 trillion.
As a result, the loan-to-share ratio rose to 84.7% on Sept. 30, up from 78.3% a year earlier and up from 83.1% on June 30.
One way credit unions have coped with tighter liquidity is through borrowing, which has tripled in the past two years. It still accounts for a small portion of assets, but that portion is growing.
Callahan estimated credit unions held $130.3 billion in borrowed funds as of Sept. 30, or 5.8% of assets. That’s up from 5.4% in June, 3.8% in September 2022 and 2.1% in September 2021.