CREDIT UNION TRENDS REPORT CUNA Mutual Group Economics February (December Data) Highlights During December, credit unions picked-up 33, in new memberships and loan and savings balances grew at a.% and.% seasonally-adjusted annualized pace, respectively. Firms hired, workers, nominal consumer spending increased.% and long-term interest rates increased basis points. The economy grew.% in the fourth quarter and.% over the last year. At the end of December, CUNA s monthly estimates reported, CUs in operation, 3 fewer than one month earlier. Year-over-year, the number of credit unions declined by, more than the lost in the months ending in December. Total credit union assets rose.3% in December, below the.% rise reported in December of. Assets rose.3% during the past year due to a.3% increase in deposits, a 3.% decline in borrowings and a.% increase in capital. The nation s credit unions increased their loan portfolios by.% in December, more than the.% pace reported in December. Loan balances are up.% over the last months. With loan balances growing faster than assets during the last year, the credit union average loan-to-asset ratio reached.%, up from.% in December. Credit union memberships rose.33% in December, up from the.3% gain reported in December. Memberships are up.3% over the past year due to robust demand for credit, solid job growth and comparatively lower fees and loan interest rates. Credit union loan delinquency rates fell to.% in December; down from.3% one year earlier due to fast loan growth. The credit union net capital-to-asset ratio fell to.% in December, up from.% in December and slightly below the community banks core capital ratio of.%. ECONOMIC, COMPETITIVE AND INTEREST RATE ENVIRONMENT During December, the economy gained, jobs, the unemployment rate remained.%, nominal personal income rose.%, nominal personal spending rose.%, the national savings rate fell to.%, consumer prices rose.%, consumer confidence fell, new home sales fell.3%, existing home sales fell 3.%, auto sales rose.%, home prices rose.% and the -year treasury interest rate rose basis point to average.%. The nations, credit unions outperformed the, community banks in the credit arena in. Community bank total loan balances rose only.% in the year ending in third quarter of, below the.% gain for credit unions. Community bank loans to individuals rose only.% during the month period. Community bank real estate loans rose.%, versus.3% for credit unions. However, community banks return on assets of.% in the third quarter was significantly above credit unions.%, due to higher net interest margins, 3.% versus.% for credit unions. Asset growth was significantly slower at community banks,.%, during the last months, versus.3% for all credit unions. Total Credit Union Lending Credit union loan balances rose.% in December, slightly better than the.% pace reported in December. Driving overall loan growth was strong growth in credit card loans (.%), new-auto loans (.%) and fixed-rate mortgages (.%). December credit card seasonal factors holiday shopping typically add 3. percentage points to the underlying credit card trend loan growth. The muted December credit card growth was caused by the continuing windfall from lower gasoline prices. Credit union loan balances rose.% in, down from the.% reported in (Figure ) due to a surge in new auto, used auto and fixed-rate first mortgage growth rates. Expect loan growth to decelerate to % in but remain well above the past year average of %. Rising household formations of. million and continued job creation will keep home and auto sales strong. Figure : -.. Credit Union Loan Growth (Annual Percent Growth)...3.....3 3 -...........
Credit Union Consumer Installment Credit (CUCIC) Credit union consumer installment credit balances (auto, credit card and other unsecured loans) rose.% in December, faster than the % pace set in December. During credit union consumer installment credit grew.%, faster than the total market excluding credit unions, which grew only.% (Figure ). If guaranteed student loans are removed, then consumer credit increased only.3% for non-credit-union lenders. Household debt burdens, as measured by household debt as a percent of disposable household income, fell to % in the third quarter of, the lowest rate since the first quarter of, according to the Federal Reserve s Flow of Funds report (Figure 3). This improvement in household debt should help the economy avoid a recession for the next couple of years. Figure : Growth in Consumer Installment Credit Percent December Total Market Excluding CUs & GSLs.3% CUs.% Total Market Excluding CUs.% Figure 3: % % % % % % % % % % Household Debt (As a Percent of Disposable Household Income) % 3 3 % % % % % % % % % % % Source data: CUNA Economics & Statistics and CUNA Mutual Group - Economics Vehicle Loans Credit union new auto loan balances rose.% in December, similar to the.% pace set in December, and rose.3% for the full year. On a seasonally-adjusted annualized basis, new auto loan balances rose.% in December (Figure ), which is below the.% pace reported in December. Strong consumer fundamentals are driving auto sales and auto loan growth: an improving labor market, low gasoline prices, faster wage growth, low interest rates, expanding driving-age population, improving construction activity and better household balance sheets. Figure : Figure : CU New Auto Growth Seasonally Adjusted Annualized Growth Rate % % % % % % % % % % % % % -% % % 3 -% -% -% -% -% -% -% -% % % % % % % % % % % % % % % % -% -% -% -% -% -% -% -% -% Source: BEA & Federal Reserve. Millions of Units U.S. Vehicles Sales Seasonally Adjusted Annual Rate Recession New Auto Sales Inherent Demand Auto Sales Forecast Vehicle sales were. million in December, at a seasonally-adjusted annualized sales rate, 3.3% below the. million pace set one year earlier (Figure ). Total vehicle sales in were.3 million units, below the record high set in at. million units. Expect auto sales to slow to. million units in, which is still above the. million sales rate that economists believe is the inherent long run demand. Factors supporting auto sales include: ample access to credit, low debt burdens, strong job growth, growing hourly earnings, rising stock prices and rising home prices. Rising stock prices produce an asymmetric wealth effect, whereby an increase in wealth has a bigger impact on consumer spending than a decline in wealth, due to stock market wealth concentrated in higher income households. Source: Autodata Corp. Credit Union Trends Report
Real Estate Secured Lending First Mortgages and Other Real Estate Credit union real estate loan balances grew.3% in (Figure ), the fastest pace since. Second mortgage loan balances finally reported positive growth in, 3.%, after eight years of falling balances due to members rolling second mortgages into refinanced first mortgages. By year-end, fixed-rate first mortgages made up.% of all loans, up from.% in December of, the beginning of the Great Recession. Credit unions are making headway in serving their members mortgage needs. Currently.% of members have a first mortgage loan at their credit union, up from.% in. First mortgage credit quality improved significantly in, with delinquency rates falling to.%, down from.3% in and.% in. The housing market tightened in December as the inventory-to-sales ratio dropped to 3. months, the lowest level on record, from 3. months in November. A housing market rule of thumb is that when the ratio approaches months, expect a surge in residential construction activity. Housing demand is expected to trend upward over the next several years as fundamental drivers, including a tightening labor market, rising wages and surging confidence push home sales higher. This will help support credit union purchase mortgage originations. The contract interest rate on a 3-year, fixed-rate conventional home mortgage rose to 3.% in December, up from 3.% in November but lower than the.% reported in December. The tight labor market is pushing up labor costs, which is leading to a surge in inflation expectations. This pushed up the -year treasury interest rate to.% in December, from.3% in November. Home prices rose.% in December from November, according to the Core Logic Home Price Index, and.% yearover-year. Rising household incomes in will allow first-time homebuyers to save for a down payment and give tradeup homebuyers the financial wherewithal to purchase higher priced homes. Figure : Figure : Percent Growth CU Real Estate Loans = December % CU Surplus Funds (Cash + Investments) %..3......3....... 3% % % 3% 3% 3% 3. 3. % 3% - - All Real Estate Loans Fixed Rate st Mortgages Adjustable Rate st Mortgages Home Equity Loans -. -. -. Source data: CUNA Economics & Statistics and CUNA Mutual Group - Economics Second Mortgages Loan-to-Asset (Left Axis) % % 3 Surplus Funds (Cash + Investments) In December credit union liquidity fell to the lowest level since October. Credit union surplus funds as a percent of assets declined to.% in December, (Figure ), down from.% one year earlier, due to loan growth outpacing savings growth. Credit unions are decreasing the liquidity of their surplus funds. In December,.% of surplus funds had a maturity of less than one year, down from.3% one year earlier. During credit union savings balances rose $. billion, down from $. billion in. These sources of funds helped fund the $. billion increase in credit union loan balances in. The resulting $. billion loan funding deficit was made up with a $ billion reduction in investments and $. billion of the total $ billion increase in capital. Loans rose to.% of assets in December, up from.% one year earlier, which was the highest level since October. With loan and asset balances expected to increase.% and %, respectively, in, the credit union aggregate loan-to-asset ratio will reach 3.% by the end of this year. Alas, the last two recessions have been preceded by credit union loan-to-asset ratios climbing above %. Is this correlation or causation? In any event, this richer mix of assets should help boost credit union yield-on-asset ratios from the 3.% set in to the 3.% expected this year. 3% % % % 3% Recession Surplus Funds-to-Assets (Right Axis) 3% % % % % 3 Credit Union Trends Report
Savings and Assets Credit union savings balances rose % in December, down from the.3% reported in December, as falling expenditures on gasoline left more of members paychecks in their checking accounts at the end of the month. Savings balances typically decline.% in December due to recurring seasonal factors such as holiday spending. Savings balances rose.% for all of (Figure ), slower than the.% pace set in. Expect slower savings growth in of around % as gasoline prices rise, members increase spending and stock prices reach new highs. With spending growth outpacing personal income growth over the last year, the national savings rate (savings to disposable personal income) has moved lower. In December, the savings rate fell to.%, the lowest since the third quarter of (Figure ), due to rising fuel prices and higher consumer confidence boosting spending. The recent increase in the stock market could induce a wealth effect as stock capital gains reduce households incentive to save out of current disposable income. This will weigh on deposit growth at credit unions in. Figure : Figure : Credit Union Savings Growth (Annual Percent Growth). National Savings Rate [3-month moving average (Personal Savings/DPI)].3.... 3....... 3........ 3 3 3 3 Capital and Other Key Measures The credit union industry s net capital-to-asset ratio ended at.%, up from the.% reported at year-end, as capital growth outpaced asset growth (Figure ). The capital ratio is expected to rise to.% in as the pace of capital growth will rise to %, faster than the expected asset growth rate of %. The credit union loan delinquency rate (loans two or more months delinquent as a percent of total loans outstanding) fell to.% in December from November, and down from the.3% reported one year earlier (Figure ). With the labor market at full employment it appears the delinquency rate has settled in to an equilibrium range of.-.%. During, the delinquency rate s annual seasonal pattern reverted back to what we saw in the - period. During that era, delinquency rates typically reached their nadir in the first quarter, and then slowly rose as the year progressed and reached their apex late in the fourth quarter. Credit Union Trends Report
Figure :.... Net Capital-To-Asset Ratios.................. Figure : 3 Recession Unemployment (Left Axis) CU Delinquency Rate Versus Unemployment Rate Loan Delinquency Rate (Right Axis).% Natural Delinquency Rate (Right Axis).% Full Employment Target (Left Axis)........... 3. 3 Credit Unions and Members As of December, CUNA estimates, credit unions are in operation, down from December (Figure ). Consolidation of the credit union movement will continue due to retiring baby-boomer CEOs, rising regulatory/compliance burdens, low net interest margins, rising concerns over scale and operating efficiency, rising competitive pressures and members demand for more products, services and access channels. NCUA s Insurance Report of Activity showed eight mergers were approved in December with an average asset size of $ million. This is down from the mergers reported in December with an average asset size of $ million. The reasons given for the mergers were the following: six for expanded services, and two because of the inability to find officials. There are now approximately credit unions in the U.S. with assets greater than $ billion (Figure ), according to NCUA call report data. Figure : Figure : 3 Year-to-Date Declines in Credit Union Counts December # of Credit Unions Average Prior Years = 3,,,,3 Number of CUs (by Asset size) Q3 Q3,,,,, 3 Source data: CUNA Economics & Statistics and CUNA Mutual Group - Economics Credit unions added 33, memberships in December, bringing the membership growth to. million new members, (Figure ), the biggest annual increase in credit union history and four times the pace set a decade earlier. This membership surge is due in large part to the strong job market and rising credit demand. When people get jobs, they may also join a credit union. In, the economy added. million jobs according to the Bureau of Labor Statistics. For, expect another million jobs to be created and credit union membership growth to exceed 3.%. Total credit union memberships reached 3. million at year-end, which is 3.% of the total U.S. population of 3 million. This is up from 33.% of the population at year-end. Large credit unions reported the fastest annual growth while credit unions with less than $ million in assets reported falling memberships (Figure ). < $ mil $-$ $-$ $- $ 33 33 $- $ 3 $-$ bil >$ bil Credit Union Trends Report
Percent Figure : Figure : Millions of Members... 3. 3....... Net Gain in Total CU Membership...3 December = 3. Million.... Source data: CUNA Economics & Statistics and CUNA Mutual Group - Economics 3. 3..3. YTD Dec. National Monthly Credit Union Aggregates CAPITAL/ ------------------ ($ Billions) --------------------- (Millions) CREDIT LOAN / ASSET YR/MO LOANS ASSETS SAVINGS CAPITAL MEMBERS UNIONS SAVINGS RATIO.,.,3.3..,3...,3.,33.3..,3...,.,. 3..,.. 3.,.,...,.3. 3.,.,...,.. 33.3,3.3,...,3.. 3.,.,...,...,.3,...,...,.,3...,...,3.,...,...,3.,...,...,3.,...,...,3.,...,...3,33.,...,...,3.,..3.,.. 3.,33.,...,3...,3.,. 3..,...,3.,.3..,3.. 3.,3.,...,...,3.,...,...,3.,...,...,3.,...,3...,3.,.3. 3.,...,3.3,.. 3., 3...,.,.. 3., 3.. Credit Union Growth Rates Percent Change Previous Year Credit Union Membership Growth (by Asset size) # OF CUs Delinquency YR/MO LOANS ASSETS SAVINGS CAPITAL MEMBERS # OF CUs DECLINE Ratio*..3.. 3. (.) ().%.3...3 3. (.) ().%.... 3. (3.) ().% 3.... 3. (3.) ().%.3... 3. (.) ().% 3 - - Year Ending Q3 Year Ending Q3...3 3.. < $ mil $-$ -. -. $-$ $- $ -. -. $- $.. $-$ bil.. >$ bil Credit Union Trends Report
.... 3. (.) ().%...3. 3. (.) ().%.... 3. (3.) (3).%..... (.) ().%.... 3. (3.) ().%..3.. 3. (3.) ().%.... 3. (3.) ().%..3... (3.) ().%..... (3.) ().%..... (3.) ().% 3...3.. (3.) ().%..... (3.) ().3%...3.3. (.) ().%.....3 (3.) ().%..... (3.) ().%..... (3.) ().%..... (3.) ().%...3.. (.) ().3%..... (.) ().%..3.3..3 (.) ().% * Loans two or more months delinquent as a percent of total loans. Distribution of Credit Union Loans Estimated $ (Billions) Outstanding ST TOT. OTHR TOTAL TOTAL NEW USED TOTAL UNSEC CREDIT MORT MORT REAL YR/MO LOANS VEHICLE LOANS Ex. CC S CARDS CUCIC TOTAL ND +HE ESTATE MBLs*.... 3.. 3. 3........ 3.. 3. 3.3.... 3... 3.. 3. 33.... 3....3 3.. 3. 33.... 3.... 3.. 33. 33.... 33.3... 3.. 3. 33.... 3.... 3.. 3. 3........ 3.. 3. 33........ 3.. 3. 3..... 3... 3.. 33. 3.......3. 3.. 3. 3..3 3. 3.... 3.3 3..3 3.3 3..3 3..... 33. 3. 3. 3. 3.. 3...3.. 3. 3. 3. 3. 33....... 3. 3.. 3. 3.... 3... 3. 3.. 3. 3.....3 3.. 3.3 3.. 3. 3......3. 3.3 3. 3.. 3.. 3.. 3... 33. 3. 3..3 3.3.....3. 3. 3... 3.. 3..... 33. 3... 3.3 3..3.... 33.... 3..3..3.. 3. 33.... 3. 3...3. 3.. 33.... 33....... 3.... 3. 3... * Member Business Loans CUCIC = Total Loans Total Real Estate - MBLs CUCIC = Total Vehicle Loans + Unsecured Loans + Credit Card % of MBLs Distribution of Credit Union Loans Percent Change From Prior Year ST TOT. OTHR TOTAL TOTAL NEW USED TOTAL UNSEC CREDIT MORT MORT REAL YR/MO LOANS VEHICLE LOANS Ex. CC S CARDS CUCIC TOTAL ND +HE ESTATE MBLs*........ 3....3.3...3.3.... 3.3........ 3.. -. 3..3.3.....3 3... Credit Union Trends Report
.3......3. 3......3..... 3.......................................3..... 3.............3....3.............3... 3...................3...... 3.............3...............3.3......................... 3..............3............3.....................3....3....3. Credit Union Trends Report
Percent Annual Growth Rates Total Loans & Installment Credit CUCIC Total Loans 3 3 3 $ in Billions 3 CU Loan Portfolio $. $. $. $.3 $. $. $. $. $. $..% $..%.%.%.%.%.%.3%.%.3%.% $. $..3%.% Dec CIC Other Percent 3 3..... CIC Share of Total Loans at Credit Unions.3...3..3.... 3. 3.3.... 3.3 3... 3.. 3.3.3.3 3. 3.3 3.. 3. 3. 3 3 3 $ Billions 3 3 3 3 3 3 3333 Consumer Installment Credit at Credit Unions 3 33333 3 333 3333333333 3 33 3 33 33 3 3 3 3 This report on key CU indicators is based on data from CUNA E&S s Monthly Credit Union Estimates, the Federal Reserve Board and CUNA Mutual Group Economics. To access this report on the Internet, visit https://www.cunamutual.com/resource-library/publications/credit-union-trendsreport. If you have any questions, comments, or need additional information, please call. Thank you. Steven Rick.3., Ext.. steve.rick@cunamutual.com CUNA Mutual Group Economics CUNA Mutual Group, All Rights Reserved. CUNA Mutual Group is the marketing name for CUNA Mutual Holding Company, a mutual insurance holding company, its subsidiaries and affiliates. Credit Union Trends Report