Credit union loan growth topped 10% in October, as lending for automobiles remained in the double digits and first mortgages and credit cards continued their steady gains.
CUNA estimates released last week showed credit unions held $1.06 trillion in their loan portfolios Oct. 31, up 10.3% from a year earlier. It was the first time 12-month growth has topped 10% since December 2017. Total loan growth was 10% in 2017 and 10.4% for the previous three years.
Analysts have been predicting a slowing of credit union growth — and it has indeed slowed. However, the braking has been a bit lighter than expected. CUNA’s September forecast report estimated loan growth will be 8% in 2019, up from its previous forecast of 7% growth.
The growth projection for 2018 was increased from 9% to 9.5%. However, the 12-month growth rate ranged from 9.6% to 9.9% from January to September.
At the time, CUNA Senior Economist Jordan van Rijn said credit union portfolios had shown little sign of slowing.
“In fact, credit cards and first mortgages have grown as fast or faster than mid-year 2017,” van Rijn said. “However, we are seeing slight decreases in the rates of growth for auto loans, HELOCs and second mortgages, and commercial loans, relative to this time last year.”
Callahan & Associates’ review of third-quarter data showed the effect of the steady growth from some of those sectors, including credit cards.
Sam Taft, associate vice president of analytics for the Washington, D.C., consulting company, said credit unions provided credit cards to 17.4% of their members in September, up 1.8 percentage points from a year earlier. Auto loan penetration was 21.1%, up 4.6 percentage points.
“That has a trickle-down effect to the bottom line,” Taft said. “With increased usage of checking and credit card accounts, you see increased interchange and more non-interest income.”
And credit unions continue setting records this year for their share of U.S. credit card market. Credit unions reached 6% of the market last summer, the highest the movement has reached since the Federal Reserve began tracking their participation in credit cards in January 1984.
The Fed’s G-19 Consumer Credit Report released Friday showed credit unions held $60.2 billion in credit card debt, up 8.3% from a year earlier. The 0.5% one-month gain accelerated from a 0.1% gain in October 2017.
October’s 6% share was up from a 5.7% share a year earlier, and double the movement’s 3% share from September 2008 in the midst of the Great Recession.
“We’ve seen a lot of credit unions focus on the credit card side,” said Jon Jeffreys, Callahan’s managing partner. “Most credit unions would tell you that on a net yield basis, this is probably their most profitable portfolio they have on the lending side.”
The balance at credit unions was $59.2 billion as of Sept. 30, up 7.7% from a year earlier. That loan growth is slightly below par for total loans, and down from 8.8% growth for the 12 months ending September 2017.
In the second quarter, only 3,433 of the nation’s 5,613 federally insured credit unions reported credit card balances. The 555 credit unions with $500 million or more in assets accounted for 76% of assets and 95% of credit card balances.
The CUNA report showed total assets grew 5.8% to $1.47 trillion, while membership rose 4.8% to 118.3 million. Other changes from October 2017 to October 2018 included:
- New auto loans rose 11.9% to $146.8 billion.
- Used auto loans rose 11.3% to $224.5 billion.
- Fixed-rate first mortgages rose 10.3% to $307.5 billion.
- Adjustable-rate first mortgages rose 6.5% to $119.2 billion.
- Second mortgages rose 10.3% to $33 billion.
- Home equity lines of credit rose 6.4% to $57.5 billion.