The credit unions continued their pattern of strong credit growth in September, but CUNA chief economist Mike Schenk said Monday growth will slow as the Fed continues to raise interest rates.
“This strong credit growth will slow down as we go forward,” said Schenk.
CUNA’s monthly credit union estimates, released Friday, showed credit unions made big gains in every major area except for first-time mortgages. Total loan balances rose 19.6% year-on-year to $1.5 trillion and were up 2.1% month-on-month compared to an average gain of 0.9% in September.
Schenk said the report showed the same strong gains in loan balances this year as in previous months.
The 2.1% gain from August to September marked the third consecutive month of monthly gains of over 2%.
“Looking back over 30 years, there has never been a calendar year where we’ve had three months of loan growth this fast. It’s pretty incredible,” said Schenk.
Auto loans remain one of the leading growth areas.
New auto loans were up 22.7% year over year to $176.6 billion and were up 3% month-on-month, compared to an average gain of 1% in September.
Used-car loans were up 19% year over year to $309.9 billion and were up 2.1% month-on-month compared to an average September gain of 0.8%.
The Fed’s G-19 consumer credit report, released Monday, showed that the credit unions increased their share of the country’s total auto loan balance. Credit unions held a record 34.8% share as of September 30, up from 33.3% in June and 31.1% in September 2021.
Credit unions accounted for only about 25% in 2015. It rose to a high of 32.6% by the end of 2018 and fell to a low of 30.1% in June 2021 before setting new records in June and September of this year.
The G-19 also showed that credit unions increased their share of credit card debt.
Credit unions held $70.3 billion in credit card balances as of Sept. 30, up 14% year-on-year and 0.7% from August, compared to an average gain of 0.3% in September.
Credit unions’ share of credit card debt was 6.7% in 2022-09, compared to 6.2% in 2022-08 and 6.4% in 2021-09.
Banks held $1.02 trillion in credit card debt as of September 30, up 16.8% from a year earlier and up 0.4% from August. The share of banks was 91.0% in September, unchanged from August and up from 90.2% in September 2021.
However, real estate is suffering.
The Mortgage Bankers Association estimated that first-time mortgage originations were $480 billion in the third quarter, down 55% year-over-year. Lending is forecast to fall 59% to $410 billion in the fourth quarter.
Among the top 10 credit unions by assets, residential lending was $11.8 billion in the third quarter, down 33% from $17.6 billion a year earlier and down from $15.4 billion dollars in the second quarter.
On balance sheet, CUNA estimated that all credit unions held $549.4 billion in first mortgages, down 2% year-on-year and up 1% month-on-month compared to an average gain of 1, 1% in September.
Second-lien mortgages rose 17.8% year-over-year to $100.3 billion and were up 3.6% month-on-month compared to an average gain of 0.2% in September.
While credit has grown rapidly, savings have lagged behind. Savings for September 30 were $1.9 billion, up 6.6% year-on-year and 0.7% month-on-month.
“And all of this means that the loan-to-equity ratio is going up, and it’s up quite a bit,” Schenk said.
The loan-to-equity ratio was 79.0% on September 30, compared to 77.9% in the previous month and 70.4% in September 2021.
“That compares to a pre-pandemic figure of 71%, which is pretty close to the long-term average of 73%,” Schenk said. “That means there isn’t a lot of liquidity or liquidity has fallen very sharply over the year and that was certainly the case in the month of September.”
Schenk pointed to credit quality and membership growth as two of the brighter trends in his September report.
Credit unions had 136.1 million members as of Sept. 30, up 3.8% year-on-year, which Schenk says is “amazing” compared to annual US population growth of about 0.5%.
The delinquency rate of more than 60 days was 0.49% on September 30, down from an all-time low of 0.42% on March 31 and about half the long-term average delinquency rate of 0.96%.
“The arrears remained almost at an all-time low,” said Schenk.