Loans from credit unions increasing in most areas

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Rising and falling loan trends. (Source: Shutterstock)

Credit unions increased their portfolios in most areas in June, with the exception of business loans and new auto loans, where portfolios fell for the 24th consecutive month after seasonal adjustments, according to a CUNA report. Mutual Group released Tuesday.

The Madison, Wisconsin Trade Group Credit Union Trends Report showed that new auto loan balances stood at $ 141 billion as of June 30, falling at a seasonally adjusted annualized rate of 3.3% from May to June, part of the peak car buying season of May to October.

Credit unions held $ 252.4 billion in used car loans as of June 30, up 1.2% from May without seasonal adjustments.

The trends report makes small adjustments to the monthly CUNA credit union estimates released earlier this month. In this case, its changes allowed total auto loan balances to post a slight unadjusted gain of 0.3% from May to June, compared to a stable level in the CUNA report.

Steve Rick, chief economist for CUNA Mutual Group and author of the report, said the gains were bigger in other areas, including credit cards and home loans.

Credit union loan balances grew at an annualized and seasonally adjusted rate of 5.9% in June – which, according to Rick, is better than the 4.9% pace set in June 2020 “at the height of the crisis economic ”, but still below the 7% long-term average. Over the long term, credit union loan balances grow an average of 7% per year.

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“Credit union loan growth is finally on the rise as the economy reopens and immunization rates improve,” Rick said. “We expect credit union lending growth to be above-trend for the next two years (around 8%) as the economy resumes normal growth, pent-up demand is met and infrastructure spending kicks off.”

This is a slight change from the last forecasts of the CUNA-CUNA mutual group in June which forecast an annual growth of 5% in loan balances for 2021 and a gain of 9% in 2022.

The Trends Report showed credit card balances increased at a seasonally adjusted annualized rate of 2.2% from May to June, which Rick said was the first seasonally adjusted gain since October 2019.

“Rising gasoline prices, re-venturing consumers and spending on services will keep credit card lending growth in positive territory for the remainder of the year,” he said. .

Mortgages remain the most important area of ​​growth. Credit unions held $ 547.9 billion in first mortgage loans as of June 30, up 1.9% from June and 8.9% from a year earlier, with no seasonal adjustments.

Credit unions had 4.8% of the country’s top mortgages in their portfolios as of June 30, up from 4.7% as of March 31 and 4.6% in June 2020. Strategy is a major driver of these actions, which are based on Mortgage Bankers Association totals. Although credit unions have sold more of their mortgages in the past year, they still tend to hold a higher percentage in their portfolios than other lenders.

As measured by the mountings, credit unions have lost shares. Data from Callahan & Associates and the Mortgage Bankers Association shows credit unions generated $ 80.9 billion in first mortgage loans in the second quarter, or 7.7% of the $ 1.05 trillion in originations of all lenders.

Rick said credit union loan quality continues to improve, with low charges and a 60-day default rate of 0.44% as of June 30, well below the 0.75% that was considered to be the “natural” failure rate.

“Improving the job market is a major factor pushing the credit union loan default rate to its lowest level in over 25 years,” said Rick. “The low-forbearance programs of credit unions, lower interest rates that have helped consumers lower debt service costs, improved unemployment benefits and stimulus checks have also contributed to the very low rates. loan default.

“And finally, most of the job losses have occurred in the service sector among low income jobs,” he said. “Because working poor people usually can’t take on large debt, and if they’ve run into financial difficulties, they haven’t had a lot of debt to become delinquent. “

Rick also predicted that the number of credit unions would decline by 189 this year, compared to 143 lost in 2020. CUNA estimates that 5,530 credit unions were in operation in June, three fewer than in May and 154 fewer than ‘in June 2020.

The gap between large and small credit unions is reflected in the averages and medians of their assets. The average asset size of a credit union was $ 381.2 million in June, a “remarkable 22% increase from a year ago,” Rick said. Meanwhile, half of credit unions held less than $ 46.5 million in assets in June, a median 24% higher than the previous year.

“The trend of industry consolidation and larger credit unions is only expected to accelerate due to the benefits of greater economies of scale, higher productivity and higher incomes that are all achieved with a larger asset base, ”said Rick. “Larger, more efficient credit unions will also increase the barrier to entry for new and small credit unions.”


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