Credit Unions Zoom Past $1 Trillion in Loans

Credit unions are passing the $1 trillion mark in lending as growing numbers of members turn to their credit unions to finance cars, homes and businesses.

CUNA Mutual Group’s monthly Credit Union Trends report released Thursday shows the milestone was passed in March for its universe of all credit unions, including state-chartered credit unions that are not federally insured by NCUA.

“Credit union seasonally-adjusted annualized loan growth reached 12.5% in March, the fastest pace since the first quarter of 2000 when the stock market boom was reaching its apex and the accompanying wealth effect encouraged borrowing,” said Steven Rick, CUNA Mutual Group’s chief economist.

“The stock market boom soon turned to a bust by the third quarter of 2000, causing consumers to pull back and credit union lending to decline as well,” Rick said. “This time around, the credit boom is being driven by strong job growth and rising household formations.”

NCUA, which counts only federally insured credit unions, accounts for about 98% of loans. CUNA Mutual found loans grew 10.6% from in the 12 months that ended March 31. If loan growth among the NCUA’s federally insured credit unions grows at 10%, it will be passing the $1 trillion mark on its portfolios around about — now.

NCUA data for the March-ending quarter will be available in early June, and second-quarter data will available in September. CUNA Mutual data lags about two months.

Shares and deposits passed the $1 trillion threshold in March 2015. In March 2018 savings stood at $1.2 trillion, up 5.9% from a year earlier. Assets, which passed the $1 trillion mark in 2012, grew 7.1% over the past 12 months to reach nearly $1.5 trillion by March 2018.

The increase in total loan portfolios from February to March this year (+1.1%) was better than the one-month change a year ago (+0.9%). The improvement was aided by an acceleration in automobile loans, which now account for 35% of the credit union portfolio. In every other major loan category, momentum sagged:

• New car loans rose 1.8% to $138.8 billion from February 2018 to March compared with a 1% gain a year earlier. For the year, the balance grew 13.9%.
• Used car loans rose 1.6% to $211.4 billion from February 2018 to March compared with 1.2% a year earlier. For the year, the balance grew 11.2%.
• Credit cards loan balances fell 0.5% billion to $56.9 billion from February 2018 to March, compared with a 0.2% February-to-March drop a year ago. Consumers typically pay down holiday-bloated balances early in the year with tax refund checks. For the year, credit cards rose 8.6%.
• First-lien mortgages rose 0.9% to $403 billion from February 2018 to March compared with a 1.3% gain a year earlier when the lingering effects of the refinance surge were still being felt. For the year, first liens grew 9.3%.
• Second-lien mortgages rose a bare 0.1% to $85.5 billion from February 2018 to March compared with a 0.8% gain a year earlier. For the year, second-liens grew 8.1%.
• Member business loans rose 1.3% to $80.1 billion from February 2018 to March compared with a remarkable 6% one-month gain a year earlier. For the year, member business loans grew 13.3%.

The CUNA Mutual universe encompassed 5,727 credit unions with 114.9 million members as of March 31—4.1% more members at 246 fewer credit unions than a year ago. Rick estimates that credit union membership growth will rise at least 3.5% this year and 2.5% in 2019.

“Most of the membership growth is taking place at credit unions with assets greater than $500 million due to organic growth and mergers,” he said. “Credit unions with less than $50 million in assets lost memberships during the last 2 years.”