Trade Group Data Finds Credit Union Loan Growth Still Falling

Credit unions in July again had one of their worst months in at least nine years as their auto loan portfolios fell at the largest annual rate since at least August 2014, according to the latest trade group data.

The Credit Union Monthly Estimates from America’s Credit Unions released Aug. 13 showed total loan balances were $1.66 trillion on July 31, up only 3.8% from a year earlier — the smallest annual gain since at least August 2014.

Savings were $1.96 trillion, up 3.8% from a year ago. The loans-to-savings ratio was 84.5% as of July, unchanged from 84.5% a year earlier but up from 83.8%, a month earlier.

The recent peak annual growth rates for most major loan categories was in the fall of 2022 as demand recovered from the pandemic period.

Since then many annual rates have slipped to record lows as the Fed’s rate tightening has increased the effective federal funds rate from 0.08% in February 2022 to 5.33% in August 2023, where it has remained.

With inflation nearing the Fed’s 2% goal and the job market worsening, the Fed is expected to lower the rate by 25 to 50 basis points when its two-day meeting ends Wednesday.

Meanwhile, the toll of high rates can be seen in first mortgages and auto loans.

New car loans fell 3.6% to $172.4 billion from a year ago — the largest 12-month drop since falling 4.0% in September 2020.

Used car loans grew 0.2% to $328.2 billion from a year ago — the smallest annual gain since at least August 2014.

Total new and used cars loans stood at $500.5 billion on July 31. The 1.1% drop is the largest since at least August 2014. From June to July the balance rose 0.2%, compared with a 10-year average July gain of 1.2%.

First-lien mortgages, which grew 2.6% to $591.7 billion from a year ago, continuing a pattern of diminishing gains.

After the pandemic-era boom in first mortgages, balances declined from year-ago levels at credit unions from February 2022 to January 2023. They showed a recent peak 12-month gain of 12.8% in in March 2023, but gains have been slipping since then.

Loans that have done relatively well are personal loans, credit cards and home equity lines of credit.

NCUA Chairman Todd Harper said Sept. 5 that growth in those categories reflects the weakening economic condition of many credit union member households.

But their growth rate has also been diminishing since the fall of 2022.

The trade group’s report of 4,695 credit unions showed:

• Unsecured consumer term loans grew 5.7% to $72.2 billion from a year ago, and rose 0.2%.from June, down from an average June-to-July gain of 0.8% from 2014 to 2023.
• Credit cards grew 6.3% to $83.6 billion from a year ago, and rose 0.8%.from June, down from a 10-year average July gain of 1%.
• Second-lien mortgages grew 22.6% to $150.8 billion from a year ago — still a huge gain, but down from the recent peak of about 40% in April 2023.
• Credit union membership numbers were 142.5 million, up 1.2% from a year ago, and rose 0.1% from June, compared with an average July gain of 0.4%.
• The 60-day-plus delinquency rate was 0.86% as of July 31, up from 0.67% a year earlier and down from 0.87% a month earlier, compared with an average July rate of 0.56% over the previous seven years.