Loan growth continues to pick up at credit unions, but it is a slow crawl, according to the latest analysis in CUNA Mutual's Trends Report.
Analysis in the report expresses some "concern" over trends related to first mortgages in the first half of 2013. Membership growth, meanwhile, continues to come primarily from larger CUs.
On an annual basis, loans at CUs were up 5% through June (up from 3% through June 2012), bringing total CU loans outstanding to $627 billion. CU loans increased $4.7 billion (0.8%) in June and are up $12.5 billion (2%) through the first half of 2013, CUNA Mutual reported.
"Based on my 36 years of experience (five full economic cycles) forecasting CU trends, consumer finance and the economy, I see the slow recovery continuing through at least 2015, barring any shocks," said CUNA Mutual's Chief Economist, Dave Colby. "Risk factors remain high and the recent 73% increase in the 10-Year Treasury rate is a significant concern for the housing market recovery, business financing, consumer durable purchases and debt service for consumers and all levels of government."
Among the data and trends from the new Trends Report:
- The loss of 56 CUs in June brought the year-over-year decline up to 285 CUs, roughly 10% ahead of the 2009-2012 pace. At 6,934, the CU count is down 136 YTD with the average size of a merged CU at $17.2 million. This average is about 9% below full-year 2012 results.
Savings & Assets Trends
- Annual savings and asset growth slowed to 4.8% in June, but will pick up in July due to an extra pay period. Deposit yields continue to fall and members continue to prefer highly liquid accounts. Colby expects final 2Q13 data to show a 16 basis point decline in CUs' cost-of-funds.
- Short-term credit, primarily vehicle loans, accounted for most of the annual gain in new auto loans, although increases in the fixed-rate first mortgage portfolio made a significant contribution.
- Membership growth remains strong. While the June addition of 195,000 members represented a slowdown from recent gains, the YTD increase of 1.6 million members and the year-over-year gain of 2.3 million, both were stronger than 2012's exceptional results. At the end of June, CUNA estimates show 97.6 million members.
- The capital-to-asset ratio finished June at 10.2% and the loan-to-share (L/S) ratio was 67.5%. Both measures are fractionally improved from their June 2012 levels. The L/S remains almost 17 percentage points below its peak and must improve if CUs are to continue growing their ROA. At 0.981%, the loan delinquency rate continues to improve. It is now 87 basis points below its recessionary peak.
- Roughly 68% of all CU loan growth during the past year is attributable to the 8.8% rise in consumer installment credit (CUCIC), and 81% of the CUCIC gain came from the $16.6 billion increase in vehicle loans. Credit cards, unsecured loans and student loans also were in positive territory. CUCIC now has increased $33 billion (15.3%) from its low point in March 2011. "We are somewhat concerned that fixed-rate first mortgages accounted for almost 42% of annual loan growth (53% on a YTD basis)" said Colby. "This may be a timing issue as members rushed to close loans and take advantage of low interest rates."
- CUNA Mutual is forecasting 5.5% annual savings and asset growth in 2013.
The Great Divide
- Total assets slipped $3.1 billion in June, but at $1.078 trillion, are up 3.4% YTD and 4.8% since June 2012.
- The pace of membership expansion slowed in June to 195,000, but the strong February-through-May period boosted the mid-year gain to roughly 300,000 above exceptional 2012 results.
- At the end of June, CUNA estimated total membership at 97.6 million, up 1.6 million through the first half of 2013 and 2.3 million during the past 12 months.
- Based on preliminary readings, CUNA Mutual believes more than 50% of all membership gains will be attributable to the 250 largest CUs by assets).
