MADISON, Wis.—Credit union membership surged by another 464,000 people during the final month of 2014, making the year one of the strongest ever for new members at CUs as the total rose to almost 102 million Americans.
Loan growth generally kept pace with both the new memberships and the improving consumer confidence, according to new analysis released by CUNA Mutual Group as part of its Trends Report.
Among the more specific data for December of 2014:
- Credit union monthly loan balance growth reached a new cyclical high in December, reporting in at 0.83%, CUNA Mutual said, the fastest pace since July 2005. “The self-sustaining economic expansion should keep monthly loan growth above 0.8% and annual growth over 10%,” the report projects.
- Credit unions’ consumer installment credit balances rose a modest 0.2% in December, or $0.7 billion, down from the 0.7% advance, $1.8 billion, reported in December 2013. The slowdown was due to falling gasoline prices reducing retail sales spending by 0.9%. December’s data shows consumers redirected their savings at the gas pump toward less debt accumulation and faster deposit growth, instead of additional spending, CUNA Mutual said. During the last 12 months, however, credit union consumer installment credit balances rose a strong 13.8%, the fastest pace since August 1995. Credit card loan delinquency rates fell to a remarkably low 0.89% in the third quarter of 2014, down from 0.93% at the end of 2013 and 2.06% set in 2009, due to record low debt burdens, faster job growth, and rising average hourly earnings.
- The pace of CU auto lending accelerated in December, as new auto loan balances increased 0.9%, up from 0.8% reported in December 2013. For the year, CU new auto loan balances rose 20.7%, the fastest pace since August 1995, according to CUNA Mutual. Used auto loan balances also reported a strong year, rising 12.1%. Auto loans now make up 32.4% of the CU loan portfolio, up from the cyclical low of 28.6% set back in January 2012.
- Credit union real estate secured loan balances rose 7.3% in 2014, better than the 5.7% pace reported in 2013, due to credit unions selling less of their first mortgage originations into the secondary market and home equity loan balances finally posting positive growth numbers. Credit unions placed 67.4% of all first mortgage originations onto their balance sheets in 2014, up from only 54.1% in 2013, in an attempt to boost record low asset yields, CUNA Mutual reported.
- Credit union liquidity fell in December in order to fund strong loan growth and pay down external borrowings. Surplus funds fell 2.8% in December, -$10.4 billion, in order to fund a 0.7% increase in loan balances, $5.1 billion, and the paying down of external borrowings by 11.3%, -$4.3 billion. Credit union investment yields rose during 2014 to reach 1.21%, up from 1.10% in 2013, due to rising 3-5 year market interest rates, a smaller share of investments invested for less than one year, and the placement of funds with investments with greater credit risk, the CUNA Mutual analysis says.
- Surplus funds as a percent of assets fell to 31.9% in December, below the 35.2% reported in December 2013, due to strong loan growth in 2014. This 3.3 percentage point shift in the mix of credit union assets from investments to loans, and the fact that the average yield on loans (4.80%) exceeded the average yield on investments (1.20%) by 3.6 percentage points pushed credit union asset yields up 12 basis points (3.3% x 3.6%). However, this “mix effect” was exactly offset by the “rate effect” due to the yield on loans falling from 5.04% in 2013 to 4.80% in 2014. Therefore, credit union yield on assets were unchanged during the last two years, coming in at a record low 3.36%, CUNA Mutual stated.
- Credit union savings balances rose 4.8% in 2014, up from 3.6% reported during 2013, due to the surge in memberships and the drop in oil prices. Personal spending on goods and services, however, actually fell 0.3% in December, and debt accumulation remained strong. The result, credit unions experienced a 0.2% increase in savings balances, up from a 0.3% drop in December of 2013. Moreover, the national savings rate (savings-to-disposable income) rose to 4.9%, up from 4.3% in November.
- The credit union average net capital-to-asset ratio reached 10.8% in 2014, the highest level since before the Great Recession and significantly above the 7% required to be “well capitalized” according to the NCUA. “Expect earnings performance to improve in 2015, pushing the capital ratio to 11.3% and close to the record high set in 2006,” CUNA Mutual is projecting.
- The CU loan delinquency rate (loans two or more months delinquent as a percent of total loans outstanding) fell to 0.82% in December, from 1.00% in December 2013. On the real estate front, foreclosure filings fell 18% in 2014 due to rising home prices and households better able to meet monthly mortgage payments. Expect bankruptcies and foreclosures to move even lower in 2015 due to strong job growth, rising home prices, and rising wages, the company said.
- As of December 2014, CUNA estimates 6,535 credit unions were in operation, 11 fewer than November. The pace of consolidation in the credit union system decelerated in 2014 with only 260 credit unions exiting the financial institution space, down from a 275 decline reported in 2013.
- Credit unions added a remarkable 464,000 memberships in December, bringing the 2014 total to 3.5 million new members. In the fourth quarter, an average of 333,000 new members were added per month to credit union membership rolls, up from a 267,000 monthly average in the third quarter.
- “This membership surge is due in large part to the recovery in the labor market. When people get jobs, they may also join a credit union. In the fourth quarter, the economy added an average of 324,000 jobs per month, up from the 237,000 monthly average in the third quarter,” CUNA Mutual said.
- Another factor causing the remarkable surge in memberships is the exceptional pace of new auto sales and loans. Auto sales rose to 16.5 million units in 2014, the fastest pace since 2005. With job gains and auto sales expected to remain robust in 2015, credit unions can expect another year of strong membership growth. In percentage terms, credit union memberships rose 0.5% in December, and 3.6% during 2014, the fastest annual pace since July 2003