CREDIT UNION TRENDS REPORT CUNA Mutual Group Economics February (December Data) Highlights During December, credit unions picked-up, in new memberships, 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 decreased basis points. Economic growth fell to.% in the fourth quarter and.% over the last year. At the end of December CUNA s monthly estimates reported, CUs in operation, 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.% in December, above the -.% decline reported in December of. Assets rose.% during the past year due to a.% increase in deposits, an.% increase 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.% during 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.% in December, down from the.% gain reported in December. Memberships are up.% during 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.% one year earlier due to fast loan growth, a robust labor market, and lower gas prices. The credit union capital-to-asset ratio fell to.% in December, down from.% in December, and equal to community banks core capital ratio. ECONOMIC, COMPETITIVE AND INTEREST RATE ENVIRONMENT During December, the economy added, jobs, the unemployment rate remained at.%, personal income rose.%, personal expenditures rose.%, consumer prices fell.%, consumer confidence rose, new home sales jumped.%, existing home sales rose.%, auto sales fell %, home prices rose.%, and the -year Treasury interest rate decreased basis points 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.% for credit unions. However, community banks return on assets of.% in the third quarter was significantly above the credit unions.%, due to higher net interest margins,.% versus.% for credit unions. Asset quality was slightly better at credit unions than community banks in the third quarter with credit unions reporting an annualized loan charge off rate of.%, below the.% rate at community banks. Total Lending Credit union loan balances rose.% in December, slightly better than the.% pace reported in December. Driving overall loan growth was strong growth in adjustable-rate mortgages (.%), credit card loans (.%) and newauto loans (.%). November credit card seasonal factors holiday shopping - typically add. percentage points to the underlying credit card trend loan growth. The muted December credit card growth was caused by the continuing windfall from lower fuel prices. Credit union loan balances rose.% in, down slightly from the.% reported in (Figure ) due to a slight slowdown in new auto and credit card 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 in. -. Credit Union Loan Growth (Annual Percent Growth)....... Figure.. -.......
Credit Union Consumer Installment Credit (CUCIC) Credit union consumer installment credit balances (auto, credit card and other unsecured loans) rose.% in December, twice the.% pace set in December. During credit union consumer installment credit grew.%, faster than the total market excluding credit unions which grew only.% (Figure ). And if you further factor out guaranteed student loans, consumer credit increased only.% for non-credit-union lenders. Household s 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 ). This improvement in households financial position should help the economy weather the recent financial market volatility. Growth in Consumer Installment Credit Percent December CUs.% % % Household Debt (As a Percent of Disposable Household Income) % % Total Market Excl. CUs.% % % % % % % % % - Total Market Excl. CUs & GSLs.% % % % % % % % % % % Source data: CUNA Economics & Statistics and CUNA Mutual Group - Economics Figure Figure Vehicle Loans Credit union new auto loan balances rose.% in December, faster than the.% pace set in December, and rose.% for the full year. On a seasonally-adjusted annualized basis, new auto loan balances rose.% in December (Figure ), a slight acceleration from the third quarter but below the % cyclical high reported in August. Strong consumer fundamentals are driving auto loan growth: an improving labor market, falling oil prices, faster wage growth, low interest rates, expanding driving-age population, improving construction activity, and better household balance sheets. % % % % % % % % % % % % % % % -% CU New Auto Growth Seasonally Adjusted Annualized Growth Rate -% -% -% -% -% -% -% -% % % % % % % % % % % % % % % % -% -% -% -% -% -% -% -% -% Source: BEA & Federal Reserve. U.S. Vehicles Sales Seasonally Adjusted Annual Rate Figure Figure Vehicle sales were. million in December, at a seasonally-adjusted annualized sales rate,.% above the. million pace set one year earlier (Figure ). Expect auto sales to exceed. million pace in, slighter better than the. million sales pace of due to improving household financial health. Factors supporting auto sales include ample access to credit, low debt burdens, strong job growth, growing hourly earnings, rising home prices and pent up demand. Falling stock prices is one headwind as households postpone liquidating financial assets to purchase a new car. Fortunately there appears to be 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. Millions of Units Recession New Auto Sales Inherent Demand Source: Autodata Corp. Credit Union Trends Report
Real Estate-Secured Lending st Mortgages and Other Real Estate Credit union real estate loan balances grew.% in (Figure ), the fastest pace since, due to a % surge in mortgage originations. The only real estate loan category reporting negative growth in were second mortgages due to members rolling those balances 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.% in and. in. The housing market tightened in December as the inventory-to-sales ratio dropped to. months from. months in November. A housing market rule of thumb is that when the ratio approaches months, expect a surge in residential construction activity. The contract interest rate on a -year, fixed-rate conventional home mortgage rose to.% in December, from.% in November, and higher than the.% reported in December. The recent financial market volatility has created a flight to safety effect in the Treasury market, pushing down the -year Treasury interest rate by basis points since the end of to around.% in mid February. This has caused the -year mortgage interest rate to drop basis points to.% in mid-february. This will create a mini refinance boom at credit unions in the first quarter. Expect mortgage interest rates to remain below % through the first half of the year as the Federal Reserve waits until summer to resume their rate normalization policy. Home prices rose.% in December from November, according to the Core Logic Home Price Index, and.% yearover-year. Resurgence in home purchase demand this year will cause home prices to rise % in and % in. Expect the U.S. economy to reach full employment by the second quarter which will cause wages pressures to accelerate. This will encourage potential homebuyers to jump into the housing market and make a purchase. This will help reverse the recent downward trend in the homeownership rate which fell to.% in the fourth quarter of, down from.% in fourth quarter of. Percent - - -. Growth CU Real Estate Loans....... All Real Estate Loans Fixed Rate st Mortgages = December.... Adjustable Rate st Mortgages -. -... Home Equity Loans -. -. -. Source data: CUNA Economics & Statistics and CUNA Mutual Group - Economics Second Mortgages -. % % % % % % % % % CU Surplus Funds (Cash + Investments) Recession Surplus Funds-to-Assets (Right Axis) % Loan-to-Asset (Left Axis) % % % % % % % % % % % % Figure Figure Surplus Funds (Cash + Investments) Credit union liquidity fell to the lowest level since February in December. 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 however increasing the liquidity of their surplus funds. In December,.% of surplus funds had a maturity less than year, up from.% one year earlier. This portfolio change is an attempt to reduce the interest rate risk exposure of falling investment prices as market interest rates increase. During credit union savings balances rose $. billion. These funds helped increase surplus funds by $. billion and loan balances by $.. The funding deficit was made up by $. billion in wholesale borrowings and $. billion in additional capital. Loans rose to.% of assets in December, up from.% one year earlier, which was the highest level since August. With loan and asset balances expected to increase % and.%, respectively, in, the loan-to-asset ratio will reach % by year end. This richer mix of assets should help boost credit union yield-on-asset ratios from the record low of.% set in to.% this year. Credit Union Trends Report
Savings and Assets Credit union savings balances rose.% in December, above the.% reported in December, as falling expenditures on gasoline left more of members paychecks in their checking account at the end of the month. Savings balances typically decline.% in December due to recurring seasonal factors like holiday spending. Savings balances rose.% for all of (Figure ), the fastest pace since the Great Recession of -. Expect strong savings growth in the first half of as gas prices continue to fall and members not yet fully redeploying that spending power. With personal income growth outpacing spending growth over the last year, the national savings rate (savings to disposable personal income) has edged higher. In December, the savings rate rose to.%, the highest since early (Figure ) due to falling fuel prices and rising household incomes. The recent decline in the stock market could induce households to increase their savings rates to make up for lost capital, also increasing deposit growth at credit unions. Credit Union Savings Growth (Annual Percent Growth). National Savings Rate [-month moving average (Personal Savings/DPI)]............... Figure Figure Capital and Other Key Measures The credit union industry s capital-to-asset ratio ended at.%, down slightly from the.% reported at year-end as asset growth outpaced capital growth (Figure ). The credit union loan delinquency rate (loans two or more months delinquent as a percent of total loans outstanding) remained at.% in December from its November reading, but down from the. reported one year earlier. During, the delinquency rate s annual seasonal pattern reverted back to what we saw in the - period. During that era, delinquency rates typically reach their nadir in the first quarter, and then slowly rise as the year progressed and reached their apex late in the fourth quarter. From to, the annual seasonal pattern changed to a downward step function as the effects of a falling unemployment rate more than offset the seasonal effects. (Figure ). Figure Net Capital-To-Asset Ratios................... Figure CU Delinquency Rate Versus Unemployment Rate Recession Unemployment (Left Axis) Delinquency (Right Axis)..................... Credit Union Trends Report
Percent Credit Unions and Members As of December, CUNA estimates, credit unions are in operation, down from December (Figure ). The pace of consolidation in the credit union system accelerated in due to 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 more products, services and access channels. NCUA s Insurance Report of Activity showed mergers were approved in December with an average asset size of $ million. This is up from the mergers reported in December with an average asset size of $ million. A large Michigan credit union United Saint Joseph with $ billion in assets - merged with a $ billion credit union in December which significantly increased the average merged credit union asset size. There are now approximately credit unions in the U.S. with assets greater than $ billion (Figure ), according to NCUA call report data. Year-to-Date Declines in Credit Union Counts December # of Credit Unions Average Prior Years =,,,,, Number of CUs (by Asset size) Third Quarter Third Quarter,,,,, Source data: CUNA Economics & Statistics and CUNA Mutual Group - Economics < $ mil $-$ $-$ $- $ $- $ $-$ bil >$ bil Figure Figure Credit unions added, memberships in December, bringing the membership growth to. million new members, see Figure, the biggest annual increase in credit union history and more than twice 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.%. Total credit union memberships reached. million at year end, which is.% of the total U.S. population of million. This is up from.% 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 ). Millions of Members......... Figure Net Gain in Total CU Membership... December =. Million... Dec.. Source data: CUNA Economics & Statistics and CUNA Mutual Group - Economics... Forecast. - - - -. -. Figure Credit Union Membership Growth (by Asset size) Third Quarter Third Quarter...... < $ mil $-$ $-$ $- -. -. $ $- $.. $-$ bil.. >$ bil Credit Union Trends Report
National Monthly Credit Union Aggregates CAPITAL/ ------------------ ($ Billions) --------------------- (Millions) CREDIT LOAN / ASSET YR/MO LOANS ASSETS SAVINGS CAPITAL MEMBERS UNIONS SAVINGS RATIO.,....,...,....,...,....,...,....,...,....,...,....,...,....,...,....,...,....,...,....,...,....,...,....,...,....,...,....,...,....,...,.,...,...,.,...,...,.,...,...,.,...,...,.,...,...,.,...,...,.,...,...,.,...,...,.,...,...,.,...,.. Credit Union Growth Rates Percent Change Previous Year # OF CUs Delinquency YR/MO LOANS ASSETS SAVINGS CAPITAL MEMBERS # OF CUs DECLINE Ratio*..... (.) ().%..... (.) ().%..... (.) ().%..... (.) ().%..... (.) ().%..... (.) ().%..... (.) ().%..... (.) ().%..... (.) ().%..... (.) ().%..... (.) ().%..... (.) ().%..... (.) ().%..... (.) ().%..... (.) ().%..... (.) ().%..... (.) ().%..... (.) ().%..... (.) ().%..... (.) ().%..... (.) ().%..... (.) ().%..... (.) ().%..... (.) ().%..... (.) ().% * Loans two or more months delinquent as a percent of total loans. Credit Union Trends Report
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*................................................................................................................................................................................................................................................................................... * Member Business Loans 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*........ (.).......... (.).......... (.).......... (.).......... (.).......... (.).......... (.)........................................................................................................................................................................................................ Credit Union Trends Report
Percent Annual Growth Rates Total Loans & Installment Credit Total Loans CUCIC $ in Billions CU Loan Portfolio Dec CIC Other $. $. $. $. $. $. $. $. $. $. $..%.%.% $..%.%.%.%.%.%.%.%.% Percent CIC Share of Total Loans at Credit Unions.................................... $ Billions Consumer Installment Credit at Credit Unions 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: Sign in at cunamutual.com Go to the Resource Library tab Under Publications heading, select Credit Union Trends Report If you have any questions, comments, or need additional information, please call. Thank you. Steven Rick.., 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