Data Shows Q1 Bounce for CUs From Q4 Pit: Callahan
But other data shows a continuing drop in loan originations and weak loan quality.
Credit union first-quarter earnings rose from the record low of 2024’s fourth quarter, while delinquencies fell, net charge-offs rose and originations continued to plummet, according to NCUA data.
The data collected in the Callahan & Associates / Peer Suite showed results for 4,567 credit unions that have filed Call Reports so far, representing 99% of the movement’s assets.
CU Times analyzed the data and compared it with data from the NCUA. The trends were similar to those CU Times reported earlier for the Top 10.
Callahan data showed net income of $3.8 billion in the first quarter, or an annualized 0.66% return on average assets. That was up from the record low 0.48% ROA of 2024’s fourth quarter, but down from 0.81% ROA in last year’s first quarter.
Loan quality went sideways. The 60-day-plus delinquency rate stood at 0.77% March 31, down from 0.83% in the fourth quarter but up from 0.52% a year ago.
William Hunt, Callahan’s director of industry analytics, said during Callahan’s quarterly “Trendwatch” webinar Tuesday that part of the reason delinquencies eased is increased savings and the seasonal bump from tax refunds.
“People have a bit more cash and are putting some of it to use, paying off some of their back due loans,” Hunt said. “However, some of that improvement in delinquency is a bit misleading because it came from a significant spike in net charge-offs, and a loan just can’t be delinquent anymore if it’s been written off and moved into collections.”
The net charge-off rate was 0.80% of average loans in the quarter, up from 0.77% in the fourth quarter and 0.52% a year ago.
Despite sluggish loan growth, the improvement in savings was enough to ease liquidity since December. The loan-to-share ratio ended 2024 at 85.1%, near its previous high of 86% in January 2019. It stood at 80.9% in March 2023.
While loan balances are gradually growing at a slowing annual rate, the drop has been sharper when measured quarterly with NCUA data, while data from America’s Credit Unions showed an actual drop since December.
The credit union industry loan balance of $1.62 trillion on March 31, according to Callahan’s data, is just 0.04% greater than the balance reported by the NCUA at Dec. 31. America’s Credit Unions reported the loan balance dropping three consecutive months, something not seen in at least 10 years. As of March 31, the trade group’s data showed the balance is 0.13% lower than Dec. 31.
Callahan’s data showed the steep drop in originations:
- Total originations were $113.8 billion in the three months ending March 31, down 16% from a year earlier, and down 8.7% from the previous quarter.
- First-mortgage originations were $19.5 billion in the first quarter, down 29% from a year earlier and down 15% from the fourth quarter.
- Originations of home equity lines of credit and other second liens were $13.4 billion in the first quarter, up 4.4% from a year earlier, and down 9.2% from the fourth quarter.
- Auto and other consumer production was $73.4 billion in the first quarter, down 14% from a year earlier, and down 6% from the fourth quarter.
- Commercial production was $7.5 billion in the first quarter, down 19% from a year earlier, and down 15% from the fourth quarter.
The fourth quarter of 2023 showed a record number of losses exceeding $5 million: 18 credit unions with a combined net loss of $381.2 million (-1.27% ROA).
The preliminary data from Callahan showed only one in the first quarter: Connexus Credit Union of Wausau, Wis., 100 miles west of Green Bay ($5.2 billion in assets, 477,436 members as of March 31).
Connexus lost $22.1 million the in the first quarter (-1.68 ROA), after losing $2.74 million (-0.20%) in the fourth quarter of 2023. For the full 12 months of 2023, Connexus was in the black with net income of $11.7 million (+0.22 ROA).
Connexus’ net interest margins slipped sharply from about 4.6% in the first three quarters of 2023 to 2.30% in the fourth quarter. It rose to 3.54% in the first quarter, or a gain of 124 basis points. Its fees were low and stable, but other operating income fell about 44 bps from the fourth quarter to the first quarter. Rising credit loss provisions cost 110 bps and higher overhead cost 124 bps.
Of the 16 credit unions with big losses in the fourth quarter, only three had a loss in the first quarter, and none were more than $10 million. The three are:
- General Electric Credit Union of Cincinnati ($5.0 billion, 286,382 members), which lost $5.3 million (-0.24% ROA) in the first quarter after losing $11.5 million (-0.91% ROA) in the fourth quarter,
- Sharonview Federal Credit Union of Fort Mill, S.C. ($1.6 billion, 92,555 members), which lost $4.9 million (-1.22% ROA) in the first quarter after a loss of $10.6 million (-2.55% ROA) in the fourth quarter.
- Kinecta Federal Credit Union of Los Angeles ($6.8 billion, 258,837 members), which lost $2.9 million in the first quarter after a loss of $12.5 million (-0.73% ROA) in the fourth quarter.