NAFCU Services Blog

Apr 03, 2013 by Dan Green
Categories: Growth & Retention

Credit Unions Calculate Your Member Share

Originally posted on CUInsight.com

Guest post written by Dan Green, Mortgage Cadence, LLC.

Prime Alliance, the NAFCU Services Preferred Partner for Credit Union Mortgage Solutions is a Mortgage Cadence company.

Year-end 2012 credit union data was released in the last few weeks. That’s an awful lot like running up and down the streets yelling, “Hey, everyone, the new phone book is here.” But for data nerds generally and these mortgage data nerds specifically, it’s a highly anticipated event. Although trends are trackable intra-year and performance predictions are easy to make, this is when we find out what really happened.

2012 was an eventful mortgage lending year. Credit unions closed $124 billion in first mortgages, the highest amount recorded in the industry’s five-decade home finance history. While dollars lent are good, market share is better. It grew, too, to 7.09%, also the highest it has ever been. If you are keeping score like the two of us have for so many years, this is truly good news. Both dollars and share continue the upward trend that began in 2006.

There are many different ways to look at mortgage lending performance. Total dollars and share of the US market are two broad measures. They are simple to calculate and easy to obtain. The reality is, however, neither tell us much about individual credit union performance, and neither provide a means of judging lending achievement vis-a-vis other credit unions. We think there are four simple ways to do that, too.

One of them is member share. We like simple measures, and this is one of the easiest: using annual credit union data, divide number of first mortgage loans granted by total members. The result, which is elementarily calculated for all credit unions, yields a simple percentage.

The result might shock you. For the top 300 mortgage granting credit unions the overall average for 2012 was 1.56%, up 48 basis points from 2011′s share of 1.08%. This is where it gets nerdier. Remember bell curves and normal distributions from statistics class? Turns out they’re helpful in real life, too. Plotting member share performance of the top 300 tells an interesting story. First, it doesn’t present as a bell curve, not really, which means this performance measure isn’t exactly normal. Here’s why: 84% of the top 300 fall plus or minus one standard deviation away from the average. That means normal in this case is member share from a low of .44% to a high of 2.69%. Just 12 credit unions report share of less than .44%; 36 come in above.

So what, you’re asking yourself. How could this possibly be important? It’s probably the biggest credit unions that report share higher than ‘normal’ and smaller that report share lower than ‘normal’. Not so, and that’s why this is important. Where a credit union falls on this not-so-normal distribution has nothing to do with size and everything to do with business model. As the market changes from refinance to purchase in the next 6 to 12 months nothing will be more important than business model.

How can you use this? Calculate your member share. Calculate it for the top 300 and for a peer group you choose, and then compare your results with that of the others. Easily done. Regardless of where you fall, this is guaranteed to raise questions that will help you think about your mortgage strategy. Remember, the math and the trends are in your favor. The housing crisis drove members and the general public to credit unions. Add to that a generous helping of rising home prices, pent-up demand for housing, a rosier employment picture and you have a recipe tailor-made for purchase-money lending success. Even greater credit union market share is on the horizon. Time to seize the opportunity.

Prime Alliance is the NAFCU Services Preferred Partner for Credit Union Mortgage Solutions.

For contact info and more educational resources, visit: www.nafcu.org/primealliance.

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