MADISON, Wis.–The robust monthly performance numbers for credit unions continue, with lending balances continuing to grow and CU membership up by nearly 400,000 during June.
And, according to CUNA Mutual’s most recent Trends Report, the pace of growth isn’t likely to let up anytime soon. CUNA Mutual’s economists offered this forecast: “Expect the economy to expand at a 2.7% pace in the third quarter and 2.3% pace in the fourth quarter, pushing the economy close to full employment and potential GDP. This will boost wages, consumer confidence and ultimately keep credit union lending growth strong.”
Here’s a look at how credit unions performed across various categories, according to the CUNA Mutual Trends Report, which is based on data gathered by CUNA:
Total Lending
Credit union loan balances rose 1.1% in June, slower than the 1.3% pace reported in June 2015, due to slower growth in fixed-rate mortgages (1.2% vs 2.4%) and adjusted-rate first mortgages (0.1% vs 0.5). The only lending product still contracting was second mortgage loans (-0.3%) as members continued to roll second mortgage balances into refinanced first mortgages, CUNA Mutual reported. June is typically the month of the year recording the fastest loan growth with seasonal factors adding 0.42 percentage points to the underlying trend growth, the company said.
Credit union loan balances were growing at a 10.1% seasonally adjusted, annualized growth rate in June, similar to the 2004-2005 credit boom.
Credit Union Consumer Installment Credit (CUCIC)
Credit union consumer-installment-credit loan balances (auto, credit card and other unsecured loans) rose 10.9% during the 12 months ending in June, more than twice the 5.3% reported by all other lenders, according to the Trends Report. Revolving credit, mostly credit cards, came in surprisingly strong in June growing at a 10.2% seasonally adjusted annualized growth rate.
Vehicle Loans
Credit union used auto loan balances grew at a 14.4% seasonally adjusted, annualized growth rate in June, a slight deceleration from the cyclically high pace set during the last couple of months, CUNA Mutual said in its analysis. On a month-over-month basis, used auto loan balances increased 1.5% in June, faster than the 1.4% reported in June 2015. The report further noted that credit union used-auto loan balances are typically 62% larger than new-auto loan balances, but a typical used auto loan is originated at roughly half the dollar amount of a new auto loan.
“So even though new auto loan balances increased 15.4% during the last 12 months and used auto loan balances grew only 14.4%, many credit unions have had to increase staffing in the used auto lending area to keep up with the surge in used auto loan demand,” the Trends Report observes.
Real Estate-Secured, 1st Mortgages, Other Real Estate
Credit union fixed-rate first mortgage loan balances grew 1.3% in June, slower than the 2.4% reported in June 2015. However, a year-to-date growth comparison shows about the same 8.3% growth rate during the first half of 2015 and 2016, CUNA Mutual said.
Adjustable-rate first mortgage loan balances grew faster than fixed-rate loans, increasing 11.1% in the first half of the year, but slightly less than the 12.1% reported in the first six months of 2015. Credit unions now hold $341 billion of first mortgages on their books, which are 3.6% of the entire mortgage market, up from 3.2% in June 2015.
Surplus Funds (Cash + Investments)
Credit union surplus funds as a percent of assets fell to 29.5% in June, down from 31.8% in June 2015, as credit unions partly funded $77.4 billion in new loans during the last year with $2.7 billion of cash and investments, according to the Trends Report.
The lion’s share of loans, however, was funded with $75.9 billion in new savings deposits. The report notes the strong growth in savings over the last year resulted in credit unions relying less on wholesale borrowings, which declined by $4.7 billion. Credit union capital balances increased by $10.1 billion during the last 12 months, pushing the credit union movement’s capital-to-asset ratio to 10.8%, slightly above the 10.7% reported in June 2015.
The obverse of the falling surplus funds ratio is the rising loan-to-asset ratio, which reached 66% in June, the highest level since April 2009.
“Credit unions can expect rising asset yields over the next year as more and more funds are moved from the investment portfolio into new and used auto loans and additional mortgage lending,” the report states.
Savings & Assets
Credit union savings balances grew 7.5% during the 12 months ending in June, significantly faster than the 5.7% average annual growth rate recorded during the last 10 years.
“This strong savings growth rate was caused by the combination of fast membership growth, 3.8% during the last 12 months, and rising savings-per-member growth, 3.6% during the last year, rates in 2017,” said CUNA Mutual in its analysis.
Capital and Other Key Measures
Credit union loan-to-share ratios rose to 77.7% in June, up from 75.8% one year earlier. The recent cyclical high of 84.1% occurred during October 2007, two months before the start of the Great Recession. Loan-to-asset ratios reached 66% in June, the highest since October 2008, which will buoy net interest margins and offset the downward pressure on margins caused by the flattening yield curve, according to the Trends Report.
Credit Unions and Members
As of June 2016, CUNA numbers show 6,119 credit unions were in operation, seven fewer than May and 278 fewer than June 2015. During the first half of 2016, approximately 117 credit unions ceased to exist because of mergers, purchase and assumptions, or liquidation, CUNA Mutual said. It is forecasting the 2016 full year decline in the number of credit unions to be 254, slightly below the 277 reported in 2015. The average asset size of a credit union now stands at $206.6 million, up 11.5% from a year ago. The median asset size is now $27.8 million, up 9.0% over the last year.
Credit union memberships grew a strong 392,000 in June, or 0.37%, which is similar to the 393,000 new members, or 0.38%, added in June 2015. Total credit union memberships have now reached 107.2 million – 33.1% of the total U.S. population of 323.7 million, CUNA Mutual said.
Year-to-date credit unions added 2.23 million new members, faster than the 1.8 million members added in 2015. Year-over-year memberships have increased at a 3.8% pace, the fastest in more than 20 years.
CUNA Mutual is projecting membership growth of 3% in both 2016 and 2017.
A copy of the CUNA Mutual Trends report for June can be found in CUToday.info’s The vault here.