MADISON, Wis.—Credit unions saw new auto loan balances hit $100 billion for the very first time, with loans for new vehicles up 16.9% in the past year, according to the latest monthly Credit Union Trends Report from CUNA Mutual Group.
The December report reflects data through October of 2015.
The company’s analysis said that strong consumer fundamentals are driving CU growth, including pushing credit unions to a record volume of first mortgage loans in the first nine months of 2015, 39% higher than the first nine months of 2014.
“2015 was a very strong year for credit unions, both from the perspective of auto loan and mortgage growth as well as credit union membership, which rose faster in 2015 than in any time in credit union history,” said Steven Rick, chief economist, CUNA Mutual Group, in a statement. “Heading into 2016, with the economic picture continuing to improve, and the Fed adding its own vote of confidence with its recent interest rate hike, the outlook is quite strong for credit unions and the hardworking families they serve.”
Among the other findings in the CUNA Mutual Trends Report for October 2015, including CUNA Mutual’s economists’ observations:
- Total Lending. 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%). 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? The answer is a resounding “No,” said CUNA Mutual.
- Credit Union Consumer Installment Credit. CU 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. During the last 12 months, credit union consumer installment credit grew 12.6%, almost twice as fast as the rest of the market. “The rise in the federal funds interest rate will increase credit card interest rates in the near term and to a lesser extent auto loan rates. This will boost credit union yields on assets and net income.”
- Vehicle Loans. 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. The number of new auto loans as a percentage of members in offering credit unions – the penetration rate – rose to 4.9% in the third quarter, up from 4.5% one year earlier. Expect auto sales to remain at the 17.5 million pace in 2016, and then declining to 17 million in 2017, and 16.5 million in 2018, CUNA Mutual forecast.
- Real Estate-Secured Lending – 1st Mortgages and Other Real Estate. 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. In 2015, credit unions originated 8.5% of all mortgage loans in the U.S., up from 4.4% in 2010.
- Surplus Funds (Cash + Investments). Credit union surplus funds rose in October by $12.4 billion due to a $14.7 billion surge in deposits. The lion’s share of surplus funds (48.2%) are invested in federal agency securities, down from 50.2% at the end of 2014. The second-largest surplus funds category, cash deposits in financial institutions, rose from 15% in December 2014 to 15.9% today. 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. Meanwhile, investments with maturities in the 5-10 year range fell from 8.6% in 2014 to 7.4% today.
- 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. 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.
- 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. 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, CUNA Mutual said.
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 10 months 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, said CUNA Mutual. 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.
A copy of the December Trends report can be found in the CUToday.info Vault here.