Credit unions continued their pattern of strong loan growth in September, but CUNA Chief Economist Mike Schenk said Monday the growth will fade as the Fed continues raising interest rates.
“That strong loan growth will be tapering off as we go forward,” Schenk said.
CUNA’s Monthly Credit Union Estimates released Friday showed credit unions made big gains in all major areas except first mortgages. Total loan balances grew 19.6% to $1.5 trillion from a year earlier, and rose 2.1% from the previous month, compared with an average September gain of 0.9%.
Schenk said the report showed the same strong gains in loan balances from previous months this year.
The 2.1% gain from August to September marked the third month in a row with monthly gains exceeding 2%.
“Looking back over 30 years, there has never been a calendar year where we’ve had three months of loan growth that fast. It’s pretty incredible,” Schenk said.
Auto loans remain one of the leading growth areas.
New car loans grew 22.7% to $176.6 billion from a year earlier, and rose 3% from the previous month, compared with an average September gain of 1%.
Used car loans grew 19% to $309.9 billion from a year earlier, and rose 2.1% from the previous month, compared with an average September gain of 0.8%.
The Fed G-19 Consumer Credit Report released Monday showed credit unions increased their share of the nation’s total balance of motor vehicle loans. Credit unions had a record 34.8% share as of Sept. 30, up from 33.3% in June and 31.1% in September 2021.
Credit unions’ share was 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 this year.
The G-19 also showed 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% from a year earlier, and up 0.7% from August, compared with an average September gain of 0.3%.
Credit unions’ share was 6.3% in September, compared with 6.2% in August and 6.3% in September 2021.
Banks held $1.02 trillion in credit card debt on Sept. 30, up 16.8% from a year earlier and up 0.4% from August. Banks’ share 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 third-quarter originations of first mortgages were $480 billion, down 55% from a year earlier. It forecast fourth-quarter originations will fall 59% to $410 billion.
Among the Top 10 credit unions by assets, residential real estate loan originations were $11.8 billion in the third quarter, down 33% from $17.6 billion a year earlier and down from $15.4 billion in the second quarter.
On the balance sheet, CUNA estimated that all credit unions held $549.4 billion in first-mortgages, down 2% from a year earlier, and up 1% from the previous month, compared with an average September gain of 1.1%.
Second-lien mortgages grew 17.8% to $100.3 billion from a year earlier, and rose 3.6% from the previous month, compared with an average September gain of 0.2%.
While loans have been growing quickly, savings have lagged. Savings were $1.9 billion on Sept. 30, up 6.6% from a year earlier, and up 0.7% from the previous month.
“And what all of that means is the loan-to-share ratio is rising and has been rising pretty strongly,” Schenk said.
The loan-to-share ratio was 79.0% on Sept. 30, up from 77.9% a month earlier and 70.4% in September 2021.
“That compares to a pre-pandemic reading of 71%, which is pretty close to the long-term average of 73%,” Schenk said. “What that means is there’s not a lot of liquidity, or liquidity has been tightening very significantly over the course of the year and it certainly did in the month of September.”
Schenk pointed to loan quality and membership growth as two of the brighter trends seen in its September report.
Credit unions had 136.1 million members on Sept. 30, up 3.8% from a year earlier, which Schenk said was “incredible” compared with annual U.S. population growth of about 0.5%.
The 60-days-plus delinquency rate was 0.49% on Sept. 30, up from an all-time low of 0.42% on March 31 and running at about half the long-term average delinquency rate of 0.96%.
“Delinquency held steady near all-time lows,” Schenk said.
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