MADISON, Wis.–As CUs’ total number gets closer to dropping below 6,000 for the first time in decades, total CU membership grew by more than 3.4 million during the first three quarters of 2016, according to the latest CUNA Mutual Trends Report.
At the same time total CU loan balances were up 0.8% in September, slower than the 1.0% pace reported in September 2015. Driving overall loan growth was strong growth in new-auto loans (1.5%), fixed-rate first mortgages (1.1%), and used-auto loans (1.1%), reported CUNA Mutual, which bases the Trends Report on CUNA data.
“The 2016 loan growth profile is very similar to the growth profile in 2015,” said CUNA Mutual in its analysis. “Loan balances rose 7.8% during the first nine months of this year, slightly below than the 8.0% reported for the similar period last year. Based on current trends, credit union lending growth could hit 10.2% this year, the third year of double digit loan growth.”
The company is projecting loan growth will slow in 2017, but also notes that the election of “Donald Trump has changed the outlook for economic growth, inflation and interest rates for the next few years. Trump is looking to implement a fiscal expansion in the form of infrastructure investment along with corporate and personal tax cuts. If implemented, this could boost economic growth 0.5 to 1.0 percentage points above the base case forecast of 2.2% growth during the next couple of years. This will add to the growing inflationary pressure the economy is already experiencing as it approaches full employment and potential output. This will increase long-term interest rates like the 10-year Treasury rate which will in turn put upward pressure on the 30-year mortgage interest rate.”
Here’s a look at CU performance by category for September:
Total Lending
Credit union loan balances rose 0.8% in September, slower than the 1.0% pace reported in September 2015. Driving overall loan growth was strong growth in new-auto loans (1.5%), fixed-rate first mortgages (1.1%), and used-auto loans (1.1%), CUNA Mutual reported.
Credit Union Consumer Installment Credit
Credit union consumer installment credit loan balances (auto, credit card and other unsecured loans) rose 1.1% in September, faster than the 0.9% pace set in September 2015, according to the Trends Report.
Vehicle Loans
Credit union new-auto loan balances rose 1.5% in September, slightly below the 1.8% pace set in September 2015. New- auto loan balances rose 16.0% during the last 12 months, faster than the 12.7% increase in used-auto loans, CUNA Mutual said. Total auto loan balances rose 14.0% since September 2015, which is faster than overall loan growth and in turn leads to auto loans making up 34.1% of the credit union loan portfolio, the highest since September 2007, the Trends Report noted.
Real Estate Secured Lending – 1st Mortgages and Other Real Estate
Credit union fixed-rate first mortgage loan balances grew a strong 1.1% in September, exactly the same pace as the 1.1% set in September 2015, due to existing-home sales surging 3.2% from August, the Trends Report stated. Adjustable-rate mortgage loan balances grew 0.3% in September, below the 2.9% pace recorded in September 2015, while home equity lending rose 0.30% in September, significantly better than the -0.9% drop reported in September 2015.
Surplus Funds (Cash + Investments)
Credit union liquidity fell to the lowest level since January 2009 in September as loan growth outpaced asset growth, the Trends Report found. Credit union surplus funds as a percent of assets declined to 29.1% in September, down from 30.4% one year earlier, due to asset growth (8.3%) outpacing surplus funds growth (3.8%). “Credit union borrowings dropped 14%, $8 billion, as credit unions paid off borrowings with surging deposit growth to boost quarter-end capital-to-asset ratios,” the Report stated. “Loans rose to 66.6% of assets in September, the highest level since February 2009.”
Savings & Assets
Credit union savings balances rose 1.5% in September, greater than the 0.2% gain reported in September 2015, due to the month ending on a payday Friday, according to CUNA Mutual. Savings balances rose 8.7% during the last 12 months due to the windfall gain from falling gas prices, rising credit union memberships and stronger job growth, the Report added.
Credit union cost of funds is expected to rise 10 basis points in 2017 as the Federal Reserve raises the Fed Funds interest rate, the Report projects.
Capital and Other Key Measures
The credit union system’s capital-to-asset ratio fell to 10.7% in September, down from 10.8% in August, due to a surge in deposit growth because of the month ending on a payroll Friday, CUNA Mutual said. The capital ratio is down from the 10.8% reported in September 2015 due to asset growth of 8.3% outpacing capital growth of 7.2%. The credit union loan-to-share ratio also declined slightly to 78.9% due to the strong growth in savings deposits.
Credit Unions & Members
As of September 2016, CUNA estimates 6,063 credit unions were in operation, down 266 from September 2015, the Trends Report said. Year-to-date the number of credit unions fell by 173, slightly less than the 184 reported in the first nine months of 2015.
Meanwhile, credit unions added more than 3.471 million memberships in the first nine months of 2016, the fastest pace in credit union history, and significantly above the 2.934 million added in the similar time period of 2015, CUNA Mutual said in its analysis.
“We expect membership growth to remain strong in 2017, but slow to a more sustainable pace of 3.3%,” the company said.