According to the CUNA’s February Monthly Credit Union Estimates, the pace of credit union loan growth slowed slightly registering 0.22%, down from 0.33% in January. Nevertheless, this represents the fastest February growth since 2015.
"Due to the coronavirus disease (COVID-19) pandemic which has put the brakes on economic growth and consumer demand, we don’t expect this pace of loan growth to continue,” said Samira Salem, CUNA senior policy analyst. “We expect generally soft demand for loans throughout the next 18 months.”
Loan growth in February was led by fixed mortgages, which grew a solid 1.11%--up from 1.04% in January—and Home Equity Lines of Credit (HELOCs), which grew 0.85%--up from 0.52% in January.
“The low interest rate environment and healthy housing market likely contributed to the uptick in fixed mortgage loan and HELOC growth,” Salem said.
Used auto loans also grew (0.40%), albeit at a slightly slower rate than in January (0.45%). By contrast, new auto loan growth and credit card lending growth declined 0.68% and 1.20%, respectively.
“The decline in credit card lending growth is not surprising; credit unions typically see a decline in credit card lending in January and February as consumers reign in their post-holiday spending and pay off balances,” Salem said. “Because of the COVID-19 pandemic, we expect mortgage growth to slow significantly and auto loans to dry up, while HELOCs and credit card loans will likely see solid growth as members’ turn to them for liquidity.”
February savings balance grew 2.49%, up from 1.20% in January. Credit unions normally experience healthy savings growth in the first quarter of the year as tax refunds begin to come in and post-holiday spending wanes.
Share draft growth led savings growth during the month, rising a healthy 5.51%, followed by regular shares (3.00%), money market accounts (1.30%), and certificates of deposit (1.17%).
With continued savings growth and a decline in loan growth, the average loan-to-share ratio decreased in February to 81.85% from 83.71% in January.
“This is important because it indicates that credit unions liquidity increased in February, which is key to serving members in the current environment,” Salem said. “Because of the pandemic, we expect this ratio to continue to decline for the rest of the year as savings growth will likely continue to outpace loan growth as a result of significantly slower economic growth, decreased consumer demand, and members looking for a safe place to keep their money. This assumes that the pace of job loss as a result of the pandemic doesn’t rise to the level that members dissave to a degree that spurs a liquidity crunch.”
The monthly credit union membership growth rate registered 0.19%, a slight increase from the growth rate in January (0.15%), but significantly slower than the membership growth rate 12 months ago, which was 0.31%. Contributing factors include slowing economic growth and slower auto loan growth, which heavily influences membership growth rates.
“We expect the rate of membership growth to slow further as the effects of the pandemic set in, economic growth slows, and auto lending dries up,” Salem added.