ADISON, Wis.–Credit unions added another 235,000 new members and loan balances grew at a 9.9% seasonally adjusted annualized pace through October, according to the latest CUNA Mutual Trends Report.
At the same time, the number of credit unions was down 36 from one month earlier and 316 for the year ending Oct. 31, which was more than the 254 that were lost in the 12 months ending October of 2014, the Trends Report said.
Overall assets were up 1.3% in October and 6.2% over the prior 12 months. Loan portfolios were 0.5% larger, with new auto loan balances hitting $100 billion for the first time in U.S. CU history, CUNA Mutual reported.
Here’s a look at performance by category, according to the latest Trends Report, which is based on CUNA and NCUA data.
Credit union loan balances rose 0.5% in October, slower than the 1.0% pace reported in October 2014. “Driving overall loan growth was strong growth in home equity lines of credit (2.3%), new-auto loans (1.1%) and used-auto loans (0.9%),” CUNA Mutual reported. “Historically, seasonal factors have a slightly negative impact on October loan growth numbers, so the pace of loan growth is being driven mainly by underlying economic trends.”
Will rising short-term interest rates lead to falling credit union loan growth in 2016? According to CUNA Mutual, “the answer is a resounding ‘no.’”
Credit Union Consumer Installment Credit (CUCIC)
Credit union consumer installment credit balances (auto, credit card and other unsecured loans) rose only 0.6% in October, slower than the 1.6% pace set in October 2014, due to a slowdown in auto and credit card lending as consumer confidence levels fell following two months of weak job growth, CUNA Mutual said. During the last 12 months, credit union consumer installment credit grew 12.6%, almost twice as fast as the rest of the market.
Credit union new auto loan balances rose 1.1% in October, slower than the 2.4% pace set in October 2014, and increased 16.9% over the last year. On a seasonally-adjusted annualized basis, new auto loan balances rose 12.8% in October, down significantly from the 22% pace reported in August 2014, according to CUNA Mutual. “Strong consumer fundamentals are driving auto loan growth…The number of new auto loans as a percent of members in offering credit unions – the penetration rate – rose to 4.9% in the third quarter, up from 4.5% one year earlier.”
CUNA Mutual’s economists are projecting a “record year” for new auto sales in 2015 at 17.5 million units, a pace it expects will continue in 2016.
Real Estate-Secured Lending
According to CUNA Mutual, credit unions originated a record amount of first-mortgage loans in the first nine months of 2015, 39% faster than the similar time period in 2014. Credit unions originated $95.3 billion of first mortgages and sold $36.9 billion into the secondary market. Credit unions sold 38.7% of all originations into the secondary market, up from 32.6% in 2014, to reduce the interest rate risk exposure from holding fixed-rate long-term real-estate loans. “Credit unions have a great unfilled opportunity in the mortgage market arena,” CUNA Mutual said.
Surplus Funds (Cash + Investments)
Credit union surplus funds rose in October by $12.4 billion due to a $14.7 billion surge in deposits. This deposit surge was caused by October 30th falling on a payday Friday, CUNA Mutual noted. Credit union surplus funds as a percent of assets rose to 30.6% in October, from 29.9% in September to reach $372.2 billion. “According to third quarter NCUA call report data, 43.5% of credit union surplus funds had maturity dates of less than one year, up from 39.8% in the third quarter of 2014,” CUNA Mutual said. “Meanwhile, investments with maturities in the 5-10 year range fell from 8.6% in 2014 to 7.4% today. The shift to shorter-maturity investments reduces credit unions’ exposure to falling investment values – price risk – as interest rates rise. However, currently 61% of credit union investments are classified as available-for-sale (AFS), up from 41% in December 2007. AFS securities are exposed to price risk, because they must be marked to market each month, but this increase in price risk is offset by the enhanced balance sheet repositioning flexibility and investment liquidity that comes with the ability to sell these securities.”
Savings and Assets
Credit union savings balances rose 1.4% in October, greater than the 1.3% reported in October 2014, due to the month ending on a payroll Friday. Savings balances grew at an 8% seasonally-adjusted annualized growth rate in October due to falling fuel prices and rising household incomes.
CUNA Mutual noted that once again asset growth is highly correlated with asset size. Large credit unions (assets > $1 billion) reported assets rising 8.8% in the year ending in the third quarter of 2015, up from 6.7% in the year ending the third quarter of 2014. Credit unions with less than $20 million in assets reported a 1% increase in asset size in the year ending in the third quarter 2015, up from 0.2% one year earlier, the company said.
Capital and Other Key Measures
The credit union system’s net capital-to-asset ratio rose to 11% in the third quarter, up from 10.9% in the third quarter of 2014, and the highest level since 2007, according to recently released NCUA call report data.
“Every asset size category reported rising capital ratios over the last year as capital grew faster than assets,” CUNA Mutual said. “One factor driving strong capital growth is the rising loan-to-share ratio. Credit unions now loan out 77.2% of all savings deposits, up from 74% in October 2014.”
The credit union loan net charge-off rate fell to 0.46% in September, down from 0.47% in September 2014, which is the lowest charge-off rate since the third quarter of 2007.
Credit Unions and Members
As of October 2015, CUNA estimates 6,264 credit unions were in operation, down 316 from October 2014. Year-to-date the number of credit unions fell by 249, slightly faster than the 215 reported in the first ten months of 2014.
“Just released third quarter NCUA call report data shows 247 credit unions with assets in excess of $1 billion and 231 credit unions with assets greater than $500 million, but less than $1 billion,” said CUNA Mutual. “The greater than $1 billion asset category represents 4.0% of all credit unions, but more than 57% of the credit union system’s assets and 60% of the loans. The median asset size of a U.S. credit union rose to $26 million, up from $24.1 million in the third quarter of 2014.”
Credit union memberships grew a modest 235,000 in October, or 0.22%, which is much better than the 57,000 new members, or 0.06%, added in October 2014, CUNA Mutual said.
Year-to-date credit unions added 3.9 million new members, faster than the 2.6 million members added during the similar period in 2014.
Total credit union memberships reached 105.3 million in October, 4.3% more than October 2014 and the fastest pace in more than 20 years. Just released third quarter NCUA call report data shows credit unions with assets greater than $1 billion reported membership growth of 6.4% during the 12 months ending in the third quarter of 2015, slightly faster than the 6.1% reported one year earlier.
The Trends Report is available in the CUToday.info Open Vault here.