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Patrick Miller, CEO of CBC FCU, and Shruti Miyashiro, CEO of Orange County’s CU

updated 05/20/14 10:47 AM
California Plays Catch-Up to U.S.
Loans, loans, and more loans—it’s a headline trend for several credit unions in California and other states, according to first-quarter reports. But is the momentum sustainable?

First-quarter average loan growth increased 10.3 percent—the highest in seven years—for a group of nearly 230 California credit unions that file regulatory call reports early, according to “first look” data recently released by Callahan and Associates.

That’s in stark contrast to the first three months of 2009-2013, when loan growth hovered near zero or turned negative.

The “first look” picture across the nation is nearly identical. Loan growth clocked in at 9.6 percent for a larger group of approximately 4,370 credit unions in the United States, which includes California and Nevada. This was the highest since 2006.

“I think it’s sustainable, although future quarterly numbers might not come in quite as high,” said Dwight Johnston, chief economist for the California and Nevada Credit Union Leagues. “Most credit unions, and the California economy in general, are playing catch-up with the U.S. economy.”

It doesn’t mean every credit union experienced loan growth—however, the positive outweighed the negative overall.

CBC FCU was one of several credit unions in this camp, posting nearly 15 percent first-quarter loan growth compared to first-quarter 2013. For the entire year, April 2013 to March 2014, it experienced 40-percent loan growth.

“Ours came from a change in strategy,” said CEO Patrick Miller. “When someone calls, we have a dedicated sales rep who’s not a processor or underwriter. We segregated those three areas, which has increased the quality of underwriting and reduced processing time. It’s allowed us to close a higher percentage of applications.”

The credit union is also in the process of transferring a majority of its assets from investments to loans. “We think it fits with the credit union mission,” Miller said.

Data from Orange County’s CU shows a 21-percent jump in first-quarter loan growth. “The increase in originations over the past few years are directly attributable to the improving economy, low interest rate environment, and efforts from our staff,” said CEO Shruti Miyashiro. “Our team members have been diligent about helping members save money with low rates, and have focused on improving our look-to-book ratio.”

While the low interest rate environment has compelled Orange County’s CU to sell the majority of long-term fixed rate mortgages, there’s “ample opportunity” to focus on adjustable-rate mortgages, direct auto loan growth, credit cards, and member business loans, she said.

Johnston said that with interest rates recently dipping, some credit unions might capture some refinance business as they did in 2012 and early 2013.

He also mentioned last Friday’s jobs report for California, published by the U.S. Bureau of Labor Statistic. Employers in the state added more than 56,000 jobs in April, with the jobless rate dropping below 8 percent for the first time since 2008, now at 7.8 percent.

“This is normalization,” Johnston said. “California has been lagging the rest of the country.”

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