MADISON, Wis.–It remains a very robust 2015 for credit unions.
New data released for June show credit unions adding more than 440,000 members continued to grow at an 11% annualized rate, all while delinquencies continued to decline.
According to CUNA Mutual’s latest Trends report, which compiles data through June 30 and which is based on figures collected by CUNA:
- Credit union loan balances rose 1.4% in June, faster than 1.3% pace reported in June 2014, due to strong growth in new-auto loans (2.0%), fixed-rate first mortgages (1.7%), and used-auto loans (1.6%). The only lending product still contracting was second mortgage loans (-0.5%) as members continued to roll second mortgage balances into refinanced first mortgages, CUNA Mutual said. June is typically the month of the year recording the fastest loan growth with seasonal factors adding 0.46 percentage points to the underlying trend growth.
- Credit union loan balances were growing at an 11% seasonally-adjusted annualized growth rate in June, similar to the 2004-2005 credit boom.
- Credit union consumer-installment-credit loan balances (auto, credit card and other unsecured loans) rose 13.7% during the 12 months ending in June, helping to pull-up the overall loan growth average to 10.9%, which is the fastest pace since September 2009. Real estate loans increased only 7.6% over the past year, reducing the pace of overall loan growth. The underlying trend of credit card loan balance growth spiked in June with the seasonally-adjusted annualized growth rate moving up to 7.6% (Figure 3) as members began loosening their purse strings, according to CUNA Mutual’s analysis.
- Credit union new-auto loan balances rose 2% in June, the fastest monthly pace so far this year, but below the 2.6% reported in June of last year. Credit union new-auto loans historically grow the fastest in June as the summer car buying season shifts into high gear. Credit union new-auto loan balances rose 20.7% over the past year making it the fastest growing credit union loan category.
- Used-auto loans, a credit union loan category typically twice as large as new-auto loans, were the second fastest growing loan category during the last 12 months, CUNA Mutual said. Used-auto loan balances rose by13.5% in the year to June. Thus, used-auto loans accounted for 25% of the total increase in loan balances over the past year, while new-auto loans only accounted for 22%.
- Credit union fixed-rate first mortgage loan balances grew 1.7% in June, slower than the 2.5% reported in June 2014. But year-to-date growth comparison shows the exact 3.1% growth rate during the first half of 2014 and 2015, said the CUNA Mutual Trends Report. Adjustable-rate first mortgage loan balances grew faster than fixed-rate loans, increasing 5% in the first half of the year, but slightly less than the 7% reported in the first six months of 2014.
- Home equity lending posted a weaker than expected growth rate in June, increasing by only 0.2%, compared to 0.4% in June 2014. “This was probably only a temporary lull, however, as consumer spending is expected to accelerate in the second half of 2015 and credit union members will tap into their home equity to finance those purchases,” said CUNA Mutual in its analysis.
- Credit union surplus funds as a percent of assets fell to 31.7% in June, down from 34.7% in June 2014, as credit unions partly funded $75 billion in new loans with $11.9 billion of cash and investments (Figure 7). The lion’s share of loans, however, was funded with $52.9 billion in new savings deposits, noted CUNA Mutual. The rest of the loans were funded by $5.0 billion in additional borrowings and $8.7 billion in additional capital (net income).
- The obverse of the falling surplus funds ratio is the rising loan-to-asset ratio, which reached 64.1% in June, the highest level since January 2010. 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.
- During June, credit unions added $10.2 billion in loans to their balance sheets, the fastest in credit union history. Surplus funds were drawn down by $14.9 billion to fund the new loans and pay down $3.5 billion in wholesale borrowings.
- Credit union savings balances grew 0.13% in June, faster than the -0.6% drop in balances in June 2014. Savings balances rose 4.4% during the first half of 2015, better than the 3.3% rise for the similar period last year.
- The underlying trend growth rate of deposits came in at a 5.3% seasonally-adjusted, annualized growth rate in June, which is the fourth time this year trend growth exceeded 5%.
- The credit union capital-to-asset ratio rose to 10.8% in June, above the 10.6% reported in June 2014. CUNA Mutual noted the capital-to-asset ratio should reach 11% by year-end, the highest level since September 2008 – the month Lehman Brothers collapsed. During the past year the dollar amount of credit union capital rose 7.3% to reach $128.3 billion. The 7.3% growth rate is also known as the return-on-equity ratio.
- The credit union loan delinquency rate (loans two or more months delinquent as a percent of total loans outstanding) fell to 0.65% in June, from 0.69% in May, and 0.85% from one year earlier.
- As of June 2015, CUNA estimates 6,378 credit unions were in operation, 20 fewer than May and 293 fewer than June 2014 (Figure 12). During the first half of 2015, approximately 135 credit unions ceased to exist because of mergers, purchase and assumptions, or liquidation. During a typical year 47% of the total decline in the number of credit unions takes place in the first half. So we can forecast the 2015 full year decline in the number of credit unions to be 287, slightly above the 282 reported in 2014, CUNA Mutual said.
- Credit union memberships grew a strong 440,000 in June, or 0.43%, much better than the 252,000 new members, or 0.25%, added in June 2014. Total credit union memberships have now reached 103-million which is 32.5% of the total U.S. population. Year-to-date credit unions added two-million new members, faster than the 1.7 million members added in 2014. Year-over-year memberships have increased at a 3.3% pace, the fastest in more than 20 years. We expect the economy to add another 3 million jobs in 2015 and 2016 contributing to credit union membership growth of 3% in both 2015 and 2016, CUNA Mutual projected.
The complete Trends Report is available in The CUToday.info Free Vault here.