Credit Unions See Faster Loan Growth in 2018 Than Banks

Even though credit union loan growth is slowing, the movement fared better than banks last year.

CUNA, CUNA Mutual and FDIC reports showed credit union loans grew more than twice as fast as banks, and credit union assets also grew significantly faster.

In the 12 months that ended Dec. 31, 2018, credit unions’ total loan portfolio grew 9.1% to $1.07 trillion.

For all banks, loans rose 4.4% to $10.2 trillion last year. That included $1.62 trillion in community bank loans, which rose 3.8%, according to the latest FDIC reports.

Credit union assets rose 5.4% to $1.48 trillion last year. Bank assets rose 3% over 12 months to reach $17.9 trillion last year, while community bank assets rose 2.3% to $2.26 trillion.

Total real estate loans among credit unions grew 8.1% to $520.9 billion last year, according to CUNA Mutual Group’s Credit Union Trends report released Thursday.

Meanwhile, FDIC reports showed total growth of real estate-backed loans among banks rose 2.4% to $4.89 trillion. At community banks, all real estate loans rose 3.3% to $1.24 trillion.

For banks, residential real estate loans rose 2.7% to $2.12 trillion as of Dec. 31, 2018. At community banks, residential real estate loans grew 0.9% to $399.8 billion.

Despite the favorable comparisons to banks, credit unions are sharing in the trend of slower loan growth. Credit unions’ 9.1% gain last year is down from a 10% gain in 2017, and down from annual gains of 10.4% to 10.5% for 2014, 2015 and 2016.

CUNA Mutual economist Steven Rick said all loan categories except adjustable-rate first mortgages fell last year.

“Expect loan growth to decelerate to 8% in 2019, slightly above 7.9% long run average. Rising household formations of 1.7 million and continued job creation will keep home and auto sales at their long run averages,” Rick wrote.

The Credit Union Trends Report showed credit unions’ total car loans grew 10.4% to $373.3 billion. That’s down from an 11.3% gain in 2017, and gains ranging from 12.8% to 14% for the previous three years.

The trend has been similar among other lenders. New car unit sales in December were 3.3% lower than in December 2017. Total vehicle sales for all of 2018 were 17.3 million units, up 0.3% from 2017, but below 2016’s record high of 17.5 million cars.

CUNA Mutual said it expects U.S. auto sales to slow to 16.7 million units in 2019, which Rick said is still above the 16.5 million sales rate that economists believe is the inherent long run demand.

Even though consumer spending has been rising, the latest Fed data showed household debt as a percent of disposable income fell to 98% as of Sept. 30, the lowest rate since the third quarter of 2001, Rick wrote.

“This improvement in household debt should help the economy avoid a recession for the next year,” he wrote.

Rick also pointed to credit unions’ rising loan-to-asset ratio. It was 72.2% in December 2018, up from 69.7% in December 2017, which was the highest level since July 1980. He predicted it will reach 72.5% by December 2019.

“Alas,” he wrote, “the last two recessions have been preceded by credit union loan-to-asset ratios climbing above 69%. Is this correlation or causation?”