MADISON, Wis.–Credit union membership growth was “on a tear during the first two months of 2017, adding 870,000 new memberships, according to new data released by CUNA Mutual.
Lending has also seen its fastest year-over-year growth in 17 years.
In percentage terms, credit union memberships rose 0.49% in February, 0.80% year-to-date, and 4.3% during the last 12 months, said CUNA Mutual’s Trends Report for April, which is based on CUNA data.
“Credit unions should expect membership growth to exceed 3.5% in 2017,” the analysis is forecasting. “This will push the total number of credit union memberships to 113.5 million by year end, which is equal to 33% of the total U.S. population.”
Other data for February as reported by the Trends Report:
Lending
Credit union loan balances rose 0.5% in February, faster than the 0.1% pace reported in February 2016, and 11.5% during the last 12 months. “This was the fastest year-over-year pace since October 2000,” the Trends report notes, adding, “February is historically the weakest loan growth month of the year, with seasonal factors typically shaving- off -0.59 percentage points from the underlying trend growth rate. Loan growth is expected to be 10% in 2017, slightly less than the 10.5% reported in 2016.”
Credit Union Consumer Installment Credit union consumer installment credit balances (auto, credit card and other unsecured loans) rose 0.9% in February, better than the 0.5% pace set in February 2016, due to strong auto lending off-setting falling credit card balances, CUNA Mutual said. Credit union consumer installment credit grew 12.1% during the last year, better than the total market excluding credit unions
Vehicle Loans
Credit union new auto loan balances rose 1% in February despite the fact that February is historically the weakest new- auto loan growth month of the year, with seasonal factors typically shaving -0.66 percentage points from the underlying trend growth rate. On a seasonally-adjusted annualized growth rate basis, new auto loan balances rose 21.6% in February – a reversal of the recent growth slowdown.
The Trends Report analysis notes, however, that “the aging of the baby boomer generation will create a vehicle sales headwind over the next 10 years as older drivers reduce their vehicle needs.”
Mortgages and Other Real Estate
Credit union fixed-rate first mortgage loan balances fell 0.1% in February, below the 0.6% gain reported in February 2016, due to rising mortgage interest rates reducing demand for the most interest-rate sensitive loan product, CUNA Mutual said. Fixed-rate first mortgage balances are up 11.1% over the last year, while adjustable-rate mortgages grew even slower at 8.1%.
Surplus Funds (Cash + Investments)
Surplus funds rose to 29.4% of assets in February from 28.4% in January due to a surge in savings deposits. However, the ratio is down two percentage points from the 31.4% reported in February 2016 due to loan growth exceeding deposit growth over the last year (11.5% versus 7.5%), the Trends Report states. Credit unions added $3.3 billion to their liquidity position during the last 12 months as well as fund a record $92.8 billion jump in loan balances, it added. The funding for the investment and loan increase came from a $79.3 billion increase in deposits, a $14.3 billion increase in borrowings and a $7.6 billion jump in capital. With loan balances expected to grow another 10% this year ($89 billion), expect surplus funds as a percent of assets to fall below 26% by year end, the lowest relative liquidity position since September 2008, CUNA Mutual is forecasting.
Savings and Assets
Credit union savings balances surged 2.3% in February, slightly above the 2.1% gain reported in February 2016, due to the seasonal factors of tax refunds and bonuses being deposited in credit union members’ share draft and regular share accounts, which increased 5.9% and 2.9%, respectively, according to the Trends Report. February’s seasonal factors typically add 1.45 percentage points to the underlying savings trend growth, the biggest of the year.
Capital and Other Key Measures
The credit union industry’s average loan net charge-off rate rose to 0.60% in the fourth quarter, up from the 0.54% reported in the fourth quarter of 2015, and is above its “natural” long-run rate of 0.5%. “Rapid loan growth over the last 3 years has allowed enough time for these new loans to ‘season,’ which is now increasing loan delinquency and charge-off rates as some consumers experience credit deterioration,” according to the Trends Report.
The credit union loan delinquency rate (loans two or more months’ delinquent as a percent of total loans outstanding) rose to 0.84% in February from 0.76% reported one year earlier.
Credit Unions and Members
As of February 2017, the Trends Report said CUNA estimates 5,977 credit unions are in operation, down 242 from February 2016. “The pace of consolidation in the credit union system is accelerating due to the following factors: retiring baby boomer CEOs, rising regulatory/compliance burdens, low net interest margins, rising concerns over scale and operating efficiency, rising competitive pressures, and members’ demand for ever more products, services and access channels,” CUNA Mutual stated. “We are forecasting the number of credit unions will decline 250 in 2017.