Preliminary third quarter data indicate a rise in return on assets with loan growth outpacing share growth, creating a liquidity squeeze, according to Callahan & Associates' First Look Program.
The consultancy reported 814 credit unions representing 31% of the credit union movement's assets participated in the program designed to give a sneak peek at quarterly data trends before the official data is released.
"ROA is up 10 basis points, due in part to the reluctance of credit unions to increase their dividneds," said Jay Johnson, EVP at Callahan's. "However, flat dividend rates are leading to a decline in new shares.
The firm suggested the rise in ROA has fueled a climb in investment yield because the Federal Reserve raised the overnight fed fund rate by 75 basispoints over the past few months.
Based on data from the participating CUs, share growth is up .08% while loan growth remained strong at 3.6%, potentially tightening liquidity. That loan growth is attributed mostly to real estate loan originations, which showed a 5.6% growth in real estate loans outstanding. Auto loans were also up by 1.6%.
"It apears that loan growth will continue its momentum through year-end, but it's only a matter of time until share rates rise, thus tightening the net interest margin and making it more challenging to increase ROA," Johnson advised.
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