MADISON, Wis.–Credit unions added 338,000 memberships in January, bringing the official total membership to 110.0 million, while lending was also robust, according to latest data from CUNA Mutual Trends Report.
Looking at credit union performance by category, the CUNA Mutual Trends report found that for January:
Total Credit Union Lending
Credit union loan balances rose 0.9% in January, better than the 0.4% pace reported in January 2016, and 11.5% during the last 12 months. Credit union seasonally adjusted annualized loan growth reached 12.8% in January 2017, the fastest pace since January 2000, CUNA Mutual said.
“This latest credit cycle boom has not yet reached its apex and looks capable of moving into its fourth year of double-digit loan growth. Why is this credit boom so sustainable? Three words: faster membership growth,” the Trends Report says in its analysis.
Credit Union Consumer Installment Credit (CUCIC)
Credit union consumer installment credit balances (auto, credit card and other unsecured loans) rose 1.1% in January, similar to the 1.2% pace set in January 2016, due to strong auto lending offsetting falling credit card balances. January’s credit card loan seasonal factors are typically the most negative of the year at -2.38%, CUNA Mutual noted. Credit union consumer installment credit grew 11.7% during the last year, bucking the downward trend of the total market excluding credit unions, which grew only 5.7%. If guaranteed student loans are factored out, then consumer credit increased only 3.8% for non-credit union lenders, according to the Trends Report.
Vehicle Loans
Credit union used auto loan balances rose 1.2% in January, faster than the 0.7% pace set in January 2016, and rose 13.5% during the last 12 months. But on a seasonally adjusted annualized basis, used auto loan balances rose at a very robust 15.8% in January, CUNA Mutual said.
“Vehicle sales at a seasonally adjusted annualized sales rate were 17.6 million in January, 1.6% below the pace set one year earlier. Expect auto sales to exceed 17.8 million in 2017, slightly more than the record 17.5 million pace set in 2016 due to improving household financial health,” CUNA Mutual said. “Auto sales should reach their peak this year as pent-up demand from the Great Recession becomes satiated.”
Mortgage Lending
Credit union first mortgage originations reached a record $143.2 billion in 2016, a 13% increase over the $126.5 billion in originations in 2015. Credit unions proceeded to sell off 39.5% of those originations into the secondary market, a higher percentage than the 38.8% in 2015. The stage is set for another strong year of credit union first mortgage growth as rising purchase activity offsets slower refinance business, CUNA Mutual forecast.
Surplus Funds (Cash + Investments)
Credit union borrowings grew $17.7 billion in January, the biggest one-month gain in credit union history, in order to take advantage of a recent riskless arbitrage profit opportunity, according to CUNA Mutual.
Borrowings as a percent of assets reached 4.8% in January, up from 3.5% in December 2016. This is close to the record-high borrowing ratio set in January 2009 during the height of the financial crisis when credit union borrowings made up 4.9% of their balance sheets. With loan growth expected to outpace savings growth in 2016 and liquidity positions already tight, expect credit unions to depend more on borrowings to meet rising loan demand, CUNA Mutual is forecasting.
Savings and Assets
Credit union savings balances fell -0.5% in January, below the -0.3% decline reported in January 2016, due to a surge in post-holiday consumer spending. The distribution of credit union savings tilted further away from certificates and toward regular shares in 2016, as credit union members awaited an increase in the fed funds interest rate, and soon thereafter credit union share certificate interest rates, CUNA Mutual said.
As has also been the case, in January credit union asset growth rates vary significantly by asset size, with billion-dollar credit unions reporting asset growth of 9.2% in 2016, around six times faster than the smallest credit unions’ growth rate of 1.6%.
Capital and Other Key Measures
The credit union industry’s net income to average asset ratio, return on assets, rose to 0.76% in 2016, from 0.75% in 2015, due to billion-dollar credit unions reporting higher income ratios while smaller credit unions reported lower income ratios. A three basis point increase in net interest margins, combined with a three basis point increase in non-interest income and a one basis point decrease in operating expense ratios was more than enough to offset a six basis point increase in loan loss provision expense, CUNA Mutual said.
Return on equity, ROE, ratios fell for most credit unions in 2016, due to the aforementioned lower return on asset ratios for smaller credit unions. The ROE ratio is one of the more important credit union metrics, because it determines the long-run sustainable asset growth rate. “For example, billion-dollar credit unions reported ROE ratios of 8.7%. This indicates their assets can grow 8.7% while maintaining a constant capital-to-asset ratio,” CUNA Mutual said.
Credit Unions and Members
As of January 2017, CUNA estimates 5,986 credit unions are in operation, down 244 from January 2016. Year-end 2016 NCUA call report data shows 275 credit unions with assets in excess of $1 billion. Those CUs held 61% of the credit union system assets and 63.1% of the loans as of Jan. 31, while making up only 4.7% of all credit unions. This is up from 253 billion-dollar credit unions in 2015, holding 58.1% of assets and 60.4% of loans.
The median asset size of a U.S. credit union rose to $29.1 million in 2016, an 8.5% increase from the $26.8 million set in 2015, CUNA Mutual said. The company is forecasting the number of credit unions will decline 250 in 2017.
Credit unions added 338,000 memberships in January, significantly above the 201,000 gain recorded in January 2016, due to strong credit demand and robust job growth.
Total credit union memberships reached 110.0 million in January 2017. In percentage terms, credit union memberships rose 0.34% in January and 4.8% during the last 12 months. With the economy expected to add another 2.2 million jobs in 2017, credit unions should expect membership growth to exceed 3.5% in 2017, CUNA Mutual said.