Lending, membership growth lead historic credit union performance

Lending and membership growth a trend of historically strong performance for credit unions according to the August Monthly Credit Union Estimates from CUNA.

“The most recent monthly estimates show that membership and loan growth grew 0.60% and 1.01%, respectively, in August,” said Jordan van Rijn, CUNA senior economist. “This continues the very strong pace of credit union growth. If credit unions continue at this pace, we would see annual membership growth of over 5%, and double-digit loan growth for the fifth straight year. Neither of those events have occurred since the 1980s.”



1CUMonthEst 0818 DISLOANSGraphic Courtesy of: CUNA.

The 1.01% growth in loans during August follows a 1.1% increase in July. Unsecured personal loans led August loan growth, rising 1.8%, followed by other mortgage loans (1.3%), used auto loans and new auto loans (both rising 1.2%), adjustable-rate mortgages (1.1%), home equity loans (0.9%), and credit card loans and fixed-rate mortgages (both rising 0.5%).

“The average credit union fixed-rate mortgage rate is now at 4.32%, up from 4% a year ago, and up from a post-recession low of 3.79% in September 2016,” van Rijn said. “However, mortgages rates remain relatively low and still well below rates in the mid-2000s, when average fixed mortgage rates were well above 6%. While all major categories of mortgage loans grew in August as rates continue to rise, it is likely that credit unions will see a decline in mortgage demand, particularly for home equity lines of credit and other second mortgages.”

Auto loan rates are also increasing and reached averages of 3.56% for new auto loans and 4.10% for used auto loans, up from 3.06% and 3.75%, respectively, one year ago. “However, auto loan demand tends to be less sensitive to small changes in interest rates, and credit unions continue to experience strong auto loan growth as a result of the robust economy,” van Rijn said.

Credit union savings balances increased 1.4% in August. Share drafts led savings growth during the month, rising 6.6%, followed by one-year certificates (1.4%), money market accounts (0.6%), and regular shares (0.03%).

2CUMonthEst 0818 DISSAVGraphic Courtesy of: CUNA.

As the Federal Open Market Committee continues to raise the Fed Funds rate, we see a parallel trend in the rising credit union loan and deposit rates,” van Rijn said. “Six of the ten major interest rate categories that CUNA tracks increased in August, with the other four remaining unchanged.”

Van Rijn noted that credit union savings are on pace to grow 7.07% for the year. “If that pace continues, it would be the largest annual increase in savings since 2009,” he said. “Certificates of deposit (CDs) have grown at the fastest annual pace among all savings categories, at 8.91%, bolstered by average CD rates that have increased from 1.10% last August to 1.56% in August of this year, an increase of 42%.”

Credit unions’ 60-plus day delinquency remained at 0.7% during August.

The loan-to-savings ratio declined to 84.5% in August from 84.9% in July. The liquidity ratio (the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities) increased to 13.3% in August from 12.5% in July.

The movement’s overall capital-to-asset ratio declined to 10.7% in August from 10.8% in July. The total dollar amount of capital increased 0.8% to $157.4 billion.

in Industry News