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Credit unions report surging loan demand

Nevada Credit Union League’s Chief Economist Dwight Johnston said it’s still too early and more financial numbers need to be released before Nevada’s loan trends can be discussed in specific context, but many credit unions seem to be benefiting from the state’s continued economic recovery.

According to data compiled by SNL Financial and Callahan and Associates, Nevada credit unions could be on track to surpassing every other state as the No. 1 loan originator during the past quarter compared with a year ago.

It’s a trend that speaks to years of consumers rebuilding their credit during and after the recession.

Quarterly loan originations, for the 10 federally insured credit unions in the state, rose 71 percent to $713 million from September 2014 to September 2015, according to Callahan and Associates. The increase in loan activity was mostly from mortgages and auto loans.

These two consumer sectors have been fueled by record-low interest rates that soon will rise, according to Callahan. Johnston attributed the loan growth to the “recovery that is still going on in Las Vegas.”

The Callahan report found the largest and most recent annual increase in credit union loan originations happened in 2003. The 40 percent jump put Nevada at No. 5 that year, Callahan reported.

Johnston said credit unions didn’t get hit as hard as banks during the recession.

“Now that they’ve come back, they are going to be more aggressive as lenders,” Johnston told the Business Press. “Auto loans and mortgages, that’s where the business has been. Overall, everything is better now.”

He expected Nevada’s economic growth to continue into 2016, but the global economy is “not looking stronger … next year.” Johnston added that Nevada and the United States should see “wage growth because there is not slack in the workforce.”

The most recent quarter’s 10 “first look” credit unions represent nearly half of the industry’s assets in Nevada, while another seven privately-insured credit unions make up the other half. Call reports for the remainder will be available in the coming weeks, according to Callahan.

“It’s possible Nevada will still be No. 1, or not far off, after all call reports are available,” said Sam Taft, industry analyst for Callahan. Taft’s basis is comparing quarterly “first look” originations with what was eventually reported for all credit unions in prior years.

Wally Murray, CEO of Greater Nevada Credit Union and chairman of the Nevada Credit Union League, said consumer confidence has increased across Nevada because of a “vastly improved” labor market, with unemployment falling from 14.5 percent in 2010 to 6.6 percent last month. The state’s job growth now ranks in the top three in the country, assisted by a wider variety of job openings.

“We’ve been successful in attracting technology companies, such as Amazon and Tesla,” Murray said. “That’s helped broaden our state’s economic base from its traditional roots in gaming, tourism and mining, all of which have significantly improved as well over the past three years.”

First mortgages are 37 percent of total loans at Nevada credit unions, with used autos at 33 percent and new autos at 7 percent, Taft said. The remaining balance is credit cards, home equity loans, other types of consumer loans and business loans.

Johnston expected the loan demand to continue even after the Federal Reserve holds to its promise of raising interest rates.

“They’ve been expecting it for a long time,” Johnston said. “Nobody expected zero interest rates for so long.”

Nevada credit unions also were ranked high in the latest loan growth report released by the National Credit Union Administration. Nationally, median loan growth was 4.1 percent during the third quarter, with Nevada near the top of the list with loan growth of 7.4 percent.

In terms of median year-over-year asset growth for the quarter, Nevada ranked seventh at 4.5 percent, while the state was eighth in terms of deposit growth at 4.3 percent, ninth in membership growth of 1.2 percent, and ninth in total delinquency rate at 0.5 percent.

Nevada ranked second behind Utah in terms of highest aggregate returns on average assets. Nationally, the annualized aggregate return on average assets at federally insured credit unions was 80 basis points; in Nevada, that figure was 113 basis points. Utah topped the list with a 139 basis point return.

The report, “NCUA Quarterly U.S. Map Review,” tracked performance indications for federally insured credit unions in 50 states and the District of Columbia.

 

Breakout Box – Banking insider

 

Credit union, bank footprint

• 21 credit unions were operating across the state (17 locally headquartered and four nonlocal) as of Sept. 30.

• In late 2014, those 17 local credit unions held $3.2 billion in deposits (2.1 percent of total institution deposits in the state, but 60 percent of locally-headquartered institution deposits).

• 25 banks were operating across the state (six locally headquartered and 19 nonlocal) as of Sept. 30.

• In late 2014, those six local banks held $2.1 billion in deposits (1.4 percent of total institution deposits in the state, but 40 percent of locally-headquartered institution deposits).

• In late 2014, nonlocal banks and nonlocal credit unions (23 of them) held $146.6 billion in deposits (96.5 percent of total institution deposits in the state). Most of these deposits were held by out-of-state-based large and regional banks.

— Source: SNL Financial

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