Loan Growth Revs Up – Yet Again

Credit unions enjoyed faster loan growth from March to April than a year ago thanks to the strength of used car loans, business loans and adjustable-rate purchase mortgages, according to a CUNA Mutual Group report Tuesday.

The Madison, Wis., CUSO’s monthly Credit Union Trends Report shows slower growth in overall car loans, while the real estate sector is picking up. The 5,724 credit unions tracked by CUNA Mutual had just over $1 trillion in total loans as of April 30, up 10.8% from a year ago. The March-to-April gain was 1.1% compared with 0.9% a year earlier.

“However, industry average loan growth rates mask big disparities between large and small credit unions,” the report said.

Credit unions with assets greater than $1 billion increased their portfolios 11% in the 12 months ending March 31, compared with 3.7% for credit unions with assets under $20 million.

Assets rose 6.2% to $1.4 trillion during the past year due to gains of 5.4% in deposits, 37% in borrowings and 6.1% in capital. Credit unions had 115.3 million members at the end of April, up 4.1% from a year ago.

“Credit unions should expect membership growth to exceed 3.5% in 2018 and 2.5% in 2019 as the economic expansion and credit demand continue for the next two years,” said Steven Rick, CUNA Mutual’s chief economist.

“Most of the membership growth is taking place at credit unions with assets over $1 billion due to organic growth and mergers,” he said. “Credit unions with less than $50 million in assets lost memberships during the last two years.”

Real estate was an overall strength for credit unions in April, but growth was uneven. Fixed-rate first mortgage loan balances rose 0.1% in April, slower than the 0.5% reported in April 2017, but adjustable-rate first mortgage balances rose a strong 2.9%.

Meanwhile, refinances have dropped off as mortgage interest rates this spring reached their highest level since the fall of 2013. The contract interest rate was 4.47% in April on a 30-year fixed-rate conventional home mortgage, up from 4.44% in March and 4.05% in April 2017.

Although the size of increases in auto loans is waning, credit unions are gaining auto loans at a much higher pace than other lenders.

From March to April, new car loans rose 1.2% to $140.3 billion, down from a 1.6% gain a year earlier. But used car loans rose 1.5% to $214.4 billion, up from a 1.2% gain a year earlier. Both sectors have been exceeding overall loan growth over the past 12 months, with new cars up 13.2% and used cars up 11.4%

One factor driving credit union gains in the May-through-October auto-buying season — low rates. The report cites Datatrac Corp., which found the average interest rate on a credit union 4-year new car loan was 2.7% compared with a bank average of 4%.

The CUNA Mutual report also found:

• Credit cards rose 0.4% to $57.1 billion from March to April, compared with 1% a year earlier. For the year, they rose 7.9%.
• First-lien mortgages rose 0.9% to $408.8 billion from March to April, compared with 0.1% a year earlier. For the year, they rose 10.7%.
• Second-lien mortgages rose 1.2% to $86.5 billion from March to April, compared with 1.9% a year earlier. For the year, they rose 7.3%.
• Member Business Loans rose 3.7% to $81 billion from March to April, compared with -7.1% a year earlier. For the year, they rose 23.3%.