MADISON, Wis.–Surging credit union membership shows no signs of letting up.
During the first two months of 2016 credit unions added 820,000 new members, compared with the 420,000 that were added over the same period in 2015, according to the latest CUNA Mutual Trends Report, which is based on data compiled by CUNA.
CUNA Mutual is projecting that credit unions should expect membership growth to exceed 3% in 2016, which will push the total number of credit union memberships to 108.5 million by year end, which is equal to 33% of the total U.S. population.
Here’s a look at other CU statistical metrics as of Feb. 29, according to the Trends Report:
Credit Union Consumer Installment Credit (CUCIC)
Credit union consumer installment credit balances (auto, credit card and other unsecured loans) rose 0.5% in February, better than the 0.0% pace set in February 2015, due to strong auto lending off-setting falling credit card balances, CUNA Mutual said. Credit union consumer installment credit grew 12.9% during the last year, better than the total market excluding credit unions.
Credit union new auto loan balances rose 0.9% in February despite the fact February is historically the weakest new auto loan growth month of the year, with seasonal factors typically shaving -0.66 percentage points from the underlying trend growth rate, according to CUNA Mutual.
Real Estate-Secured Lending – 1st Mortgages and Other Real Estate
Credit union fixed-rate first mortgage loan balances rose 0.3% in February, higher than the -1.3% decline reported in February 2015, due to falling mortgage interest rates spurring demand for the most interest-rate sensitive loan product, CUNA Mutual said. Fixed-rate mortgage balances are up 8.7% over the last year while adjustable-rate mortgages grew even faster at 11.5%.
CUNA Mutual noted credit unions are placing more adjustable-rate mortgages on their books in preparation for the Federal Reserve to raise short-term interest rates in the third quarter of this year. “Home equity loan balances are also growing as members tap into rising home equity due to rising home prices to release some of their pent-up demand for cars, appliances and furniture that built up over the last few years,” the Trends Report says.
Surplus Funds (Cash + Investments)
Surplus funds fell to 31.3% of assets in February due to a surge in savings deposits, and are down from the 33.8% reported in February 2015 due to loan growth exceeding deposit growth over the last year, according to CUNA Mutual. Credit unions drained $7.2 billion of their liquidity during the last 12 months to fund a record $76.2 billion jump in loan balances. The rest of funding for the loan increase came from a $56.9 billion increase in deposits, a $5.3 billion increase in borrowings and a $9.5 billion jump in capital, CUNA Mutual said.
With loan balances expected to grow another 10% this year (a record $80.4 billion), expect surplus funds as a percent of assets to fall below 28.5% by year end, the lowest level of liquidity since January 2009, the company projected.
Savings and Assets
Credit union savings balances surged 2.1% in February, slightly above the 2.0% gain reported in February 2015, due to the seasonal factors of tax refunds and bonuses being deposited in credit union members’ share draft and regular share accounts, which increased 5% and 3.3%, respectively, CUNA Mutual reported.
Credit union savings balances grew at an 8.0% seasonally-adjusted annualized growth rate in February, due mainly to low gas prices putting more money in members’ pockets.
Capital and Other Key Measures
The credit union industry’s average loan net charge-off rate plateaued around its “natural” long run rate of 0.5% in 2015, CUNA Mutual said. In other words, 50 cents of every $100 dollars of credit union loans are normally charged off each year. However, the rate did rise to 0.54% in the fourth quarter, up 0.08% from the 0.46% reported in the third quarter, CUNA Mutual said. The charge-off rate typically exhibits a quarterly seasonal pattern whereby the loan charge-off rate rises 0.05% in the fourth quarter and then declines during the next three quarters.
The credit union loan delinquency rate (loans two or more months delinquent as a percent of total loans outstanding) fell to 0.75% in February from 0.81% in January, but up slightly from the 0.74% reported one year earlier.
Credit Unions and Members
As of February 2016, CUNA estimates 6,187 credit unions are in operation, down 273 from February 2015. According to CUNA Mutual, the pace of consolidation in the credit union system is accelerating due to the following factors: retiring Baby Boomer CEOs, rising regulatory/compliance burden, record low net interest margins, rising concerns over scale and operating efficiency, rising competitive pressures and members’ demand for even more products, services and access channels.
CUNA Mutual reported that the 820,000 new memberships were partly driven by the 413,000 new jobs created during January and February, according to the Bureau of Labor Statistics, and by the tremendous growth in credit union auto lending.
“During the last few years credit union membership growth has been highly correlated with job creation,” CUNA Mutual stated in the Trends Report. “With job growth expected to slow slightly in 2016 to 2.5 million, we forecast credit unions to pick up an additional 3.0 million members.”