Credit Union Loan Growth Might Top 10% – Again

Credit unions continued to gain against banks in consumer lending in August as the movement heads continues one of its strongest years since the 1980s.

The Fed’s G-19 Consumer Credit Report released Friday showed accelerating growth vehicle and other non-revolving loans for credit unions in August, while credit card growth remained near all-time highs.

Meanwhile CUNA’s monthly estimates showed membership grew 0.6% from July to August, while loans grew 1% — the fifth consecutive one-month gain topping 1%. For the year, loans have risen 9.7% to $1.2 trillion.

“This continues the very strong pace of credit union growth,” said Jordan van Rijn, CUNA senior economist. “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.”

The Fed found credit unions held $391.5 billion in non-revolving debt on Aug. 31, up 9.5% from a year earlier. Vehicle loans account for about 94% of non-revolving loans at credit unions, while they accounted for 31% of loans among other lenders in June, the last Fed report with motor vehicle loan estimates.

The July-to-August gain for credit union non-revolving loans was 1.5% this year, compared with a slight 0.1% drop a year ago. Credit unions’ share of non-revolving loans was 13.5% in August, the highest share since December 2006. It rose from 13.4% in July and 12.9% in August 2017.

Credit unions held $59.8 billion in credit card debt on Aug. 31, up 8.5% from a year earlier. However, credit unions’ one-month gain was 0.5%, down from a 1.8% gain a year earlier.

The slowing kept credit unions’ share of credit card debt at 5.9% in August. However, the share was down only a hair from July, which was its highest level since the Federal Reserve began tracking card debt for credit unions in January 1984. The share was up from 5.7% in August 2017.

CUNA estimates show credit unions held $510.1 billion in real estate loans on Aug. 31, up 9% for the year and 0.4% for the month. The July-to-August gains were 1.1% for adjustable-rate mortgages, 0.5% for fixed-rate mortgages and 0.9% for home equity lines of credit.

Credit unions charged an average of 4.32% on fixed-rate mortgages, up from 4% a year ago and a post-recession low of 3.79% in September 2016. But those with longer memories can compare rates hovering around 4% to those well above 6% in the mid-2000s.

Yet the current mortgage portfolio increases are likely to melt as rates rise, he said. “It is likely that credit unions will see a decline in mortgage demand, particularly for home equity lines of credit and other second mortgages.”

Consumers are less sensitive to loan rates with automobiles, and the strong economy allowed balances to continue to grow, van Rijn said. Loan rates hit 3.56% for new cars, up from 3.06% a year ago, and 4.10% for used cars, up from 3.75% a year ago.

Credit union savings balances increased 1.4% to $1.2 trillion in August, and are on track to grow 7.1% for the year — “the largest annual increase in savings since 2009,” van Rijn said. The loan-to-savings ratio declined to 84.5% in August from 84.9% in July.

Capital increased 0.8% to $157.4 billion, while the overall capital-to-asset ratio fell to 10.7% in August from 10.8% in July.