MADISON, Wis.–Credit union memberships grew a strong 378,000 in May, 0.37% from May 2015, while lending was up 1% for the month, just slightly below where it was one year earlier, according to new analysis released as by CUNA Mutual.
And while auto lending remains robust, the CUNA Mutual analysis suggests that the “empirical evidence leads us to the conclusion that the apex of credit union auto-loan growth was reached a few months back.” Credit unions with assets greater than $1 billion reported a 5.8% increase in assets in the year ending in the first quarter due to organic growth and mergers, said CUNA Mutual in its July Trends Report.
Among the trends for May 2015 as released in the report, which is based on data compiled by CUNA:
Credit union loan balances rose 1% in May, slightly below the 1.1% pace reported in May 2014, due to strong growth in new-auto loans (1.3%), used auto loans (1.2%), and fixed-rate first mortgages (1.0%). The only lending product reporting negative growth was second mortgage loans (-0.3%) as members rolled second mortgage balances into refinanced first mortgages. Year-over-year credit union loan growth has plateaued around the 10.8% pace during the last four months.
Meanwhile savings balances grew only 4.6% over the last year, below the 5.4% 10-year average growth rate, due to members’ preference for spending to release some of their pent-up demand accumulated during the aftermath of the great recession, CUNA Mutual said.
With loans growing faster than savings the credit union average loan-to-savings ratio reached 74.6% in May, above the 70.5% reported one year earlier. “Expect loan growth to remain strong through the 2nd half of 2015 as economic growth accelerates, monthly job creation exceeds 200,000, and consumer confidence improves,” CUNA Mutual said.
Credit union consumer-installment-credit loan balances (auto, credit card and other unsecured loans) rose 13.0% during the 12 months ending in May, a modest deceleration from the 14.9% year over pace set in February. The slowdown was due to a reduction in the pace of new auto and credit card balances growth. The 13% pace is more than twice the 6.1% pace of the total market excluding credit unions.
Credit union new-auto loan balances grew at a 20.3% seasonally-adjusted, annualized growth rate in May, a slight deceleration from the 22% pace in the 4thth quarter of 2014. On a month over month basis, new auto loan balances increased 1.3% in May, slower than the 1.8% reported in May 2014. “The empirical evidence leads us to the conclusion that the apex of credit union auto-loan growth was reached a few months ago,” CUNA Mutual said.
Credit union home equity loan balances grew a strong 13.7% seasonally-adjusted, annualized growth rate in May, due to rising home prices and improving consumer confidence.
Credit union fixed-rate first mortgage loan balances rose 1.0% in May, up from the 0.4% in May 2014, as first-time home buyers returned to the housing market which may be signaling a turning point for the housing market recovery, CUNA Mutual said.
Credit union surplus funds as a percent of assets fell to 32.8% in May, down from 35.7% in May 2014, as credit unions partly funded $73.5 billion in new loans with $11.4 billion in surplus funds. This shift in the mix of credit union assets from low-yielding investments to higher-yielding loans should push up asset yields by 11 basis points, all else equal. “But unfortunately all else is not equal,” CUNA Mutual said. “This ‘mix effect’ was exactly offset by the ‘rate effect’ as the yield on loans fell from 4.84% in the first quarter of 2014 to 4.67% in the first quarter of 2015. Therefore, credit union yield on assets were unchanged over the last year, coming in at a record low 3.33%. But with credit union cost of funds falling 2 basis points, net interest margins rose 2 basis points in the first quarter compared to a year earlier.”
Credit union savings balances grew at a 5.0% seasonally-adjusted, annualized growth rate in May, a slight deceleration when compared to the last few months of the year. Contributing to the overall growth in savings balances was the 1% growth in share certificate balances during the first five months of 2015 as credit unions slowly raise deposit interest rates to help fund the surge in loan balances.
The credit union loan delinquency rate (loans two or more months delinquent as a percent of total loans outstanding) fell to 0.70% in May, from 0.71% in April, and from 0.85% in May 2014 (Figure 10). Today’s delinquency rate is the lowest since May 2007.
Credit union net capital-to-asset ratios rose across all asset categories in the first quarter of 2015 compared to one year earlier, according to NCUA call report data, as capital growth outpaced asset growth.
As of May 2015, CUNA estimates 6,398 credit unions were in operation, 15 fewer than April, and 279 less than May 2014. During the first five months of 2015, approximately 115 credit unions ceased to exist because of mergers, purchase and assumptions, or liquidation. This rate is slightly slower than the 118 reported during the similar time period in 2014.
The number of credit unions with assets greater than $1 billion rose to 237 in the first quarter of 2015, 18 more than the first quarter of 2014. The vast majority of credit unions, however, still have assets less than $20 million, and in March, NCUA call report data reported only 2,834 credit unions with less than $20 million in assets, which is 237 fewer than March 2014.
The full report can be found in CUToday.info’s Free Open Vault.