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From CU Times
Credit union loan portfolios are growing more slowly this year, a trend that is likely to continue next year, according to a CUNA Mutual Group report released Friday.
The Madison, Wis., CUSO’s monthly Credit Union Trends Report shows total loans growing 9.8% to nearly $1.1 trillion in the 12 months that ended Sept. 30.
Steven Rick, CUNA Mutual Group’s chief economist, said the combination of slower U.S. economic growth and rising consumer debt is likely to slow credit unions’ total loan growth to 8% in 2019.
Annual loan growth was running between 10% and 10.9% since the end of the Great Recession, but has been 9.6% to 9.8% since January.
The one-month growth rate also rose slightly. It was 0.7% in September up from 0.6% in September 2017.
One reason was automobile loans. Total car loans rose 0.8% to $368.7 billion in September, compared with a 0.5% one-month gain a year earlier. For the 12 months ending Sept. 30, car loans grew 11.2%, compared with 12.4% in 2017, 13.6% in 2016 and 14.8% in 2015.
Car loan growth rates continue to exceed the portfolio average, but the difference between cars and real estate is narrowing.
Total real estate loans grew 9% to $513.7 billion in the 12 months ending Sept. 30.
One area of improvement this year has been home equity and other second liens. Growth rates slowed from February to June, but they’ve been rising since then. As of Sept. 30, second liens stood at $88.7 billion, up 7.8% from a year earlier.
Home equity balances rose 0.4% in September, a turnaround from the 0.7% drop reported in September 2017.
“Seasonal factors typically shave 0.21 percentage points from the underlying monthly trend growth rate in September, so the September 0.4% increase in balances indicate credit union members are willing and able to tap into their home equity to satisfy some of their borrowing and spending needs,” Rick said.
A recent review of third-quarter results by Callahan & Associates shows credit unions increasing their net income and shares of key lending markets. Year-to-date return on average assets was an annualized 0.93% for the year, up from 0.79% for the first nine months of 2017.
Sam Taft, Callahan’s associate vice president of analytics for the Washington, D.C.-based consulting company, said credit unions are not only setting records in membership growth, they are deepening their relationships with those members.
While credit union membership grew 4% from 2016’s third quarter to 2017’s third quarter, membership grew a record 4.5% in the 12 months ending Sept. 30, adding 5 million new members.
“These new members are not only using more products and services, but they’re also increasing their balances,” Taft said.
For example, members have increased their use of their credit unions for checking accounts—a good indicator of which financial institution is primary for members. As of Sept. 30, 57.8% of members had a share draft account, up 5.5 percentage points over the past five years.
Credit unions continue to grow market share in mortgages. They generated about $106 billion in first mortgages in the nine months that ended Sept. 30, or about 8.4% of the U.S. market. That share is up from 8.1% in September 2017 and 7% in September 2013.
“We’re growing market share in a purchase market,” Taft said. “Traditionally, credit unions have had more success in the re-fi market.”