Industry Performance By The Numbers (3Q 2016)

Twenty-eight graphs, charts, and maps that evaluate credit union performance in the third quarter of 2016.

 
 

Lending

Credit unions have originated $343.6 billion in loans so far in 2016. That's a 10.7% year-over-year increase and an all-time record for the first nine months of the year. The number of loans originated year-to-date hit 24,331,585 in the third quarter. That's a 12.8% increase over third quarter 2015.

First mortgage and used auto lending were the primary drivers of portfolio growth, expanding $29.4 billion and $19.8 billion, respectively, since third quarter 2015. Together, first mortgage and used auto loans accounted for 61.8% of the entire loan portfolio as of Sept. 30, 2016. New auto and member business lending posted the largest percent increases at 15.9% and 14.4%, respectively.

On the balance sheet, outstanding loan growth outpaced deposit growth by nearly 1.5 percentage points, at 10.1% versus 8.6%. This drove up the loan-to-share ratio 1.1 percentage points to 78.5%.

 

The median credit union loan portfolio expanded 3.9% year-over-year in the third quarter. Performers in the top 20th percentile posted 12.0% growth. Credit unions in the bottom 20th percentile posted growth of -3.9%.

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Auto Lending

The auto loan por tfolio expanded 13.7% year-over-year. Used auto loans increased 12.3% to $180.0 billion, and new auto loans increased 15.9% to $113.2 billion. Auto origination market share increased 1.4 percentage points year-over-year to 17.8%, according to AutoCount data from Experian Automotive.

As the auto loan portfolio grows, it also shifts. New auto loans accounted for 38.6% of the portfolio in third quarter 2016, compared with 35.6% five years ago. Additionally, indirect lending has become the channel of choice for many credit unions. These loans accounted for 54.5% of the total auto portfolio as of third quarter.

Despite strong growth throughout the portfolio, asset quality remains sound. Auto delinquency increased just 3 basis points year-over-year to 0.63%.

 

Auto loan balances increased 13.7% in the third quarter of 2016. The median auto growth rate, however, was 6.0%. The top 20th and bottom 20th percentile grew 18.9% and -5.6%, respectively.

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Auto Market Share Map

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Mortgage Lending

First mortgage originations expanded 7.5% year-over-year to $103.2 billion as of Sept. 30, 2016. This is the highest nine-month balance on record for first mortgage originations.

Accordingly, total first mortgages outstanding followed suit. Year-over-year, first mortgages rose 9.2% — or $29.4 billion — and reached $349.5 billion at the end of September 2016.

Other real estate loans also posted gains. This segment of the loan portfolio expanded 4.0% and has added $2.9 billion to the balance sheet since Sept. 30, 2015. As of third quarter 2016, other real estate loans accounted for $77.3 billion of the loan portfolio.

Despite the growth in the loan portfolio, total mortgage activity for the industry is understated, as credit unions have sold 40.4% of their first mortgage originations to the secondary market through third quarter of 2016.

The dollar amount of sales to the secondary market increased 12.1% year-over-year and hit $41.6 billion in third quarter 2016. Credit unions in the bottom 20th percentile sold, on average, 16.6% of their first mortgage loan originations to the secondary market. The industry median for sales to the secondary market was 44.3%. Credit unions in the upper 20th percentile sold 82.0% on average.

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Credit Cards

Total credit card balances hit a recordsetting $50.7 billion in the third quarter of 2016. The industry portfolio has increased 6.9%, or $3.3 billion, since Sept. 30, 2015.

Credit card usage is also growing. Credit card penetration increased 20 basis points annually and reached 17.2% as of third quarter 2016. Average balances increased $30 — to $2,742 — over the same period. Steadily growing penetration and balances reflect a member preference for credit union products.

Although credit card growth is strong, it is no match for the activity in first mortgages and auto loans. As of the third quarter, credit card balances comprised 5.9% of total loan balances, compared with 6.1% one year prior.

Credit card asset quality is also weakening. Delinquency rose 8 basis points year-over-year, hitting 1.04% as of Sept. 30, 2016.

Usage rates across each percentile declined from previous third quarter levels, with the top 20th, median, and bottom 20th declining 60, 70, and 40 basis points, respectively.

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Shares

Credit unions have posted an 8.6% increase in share balances over the past 12 months, the fastest rate since fourth quarter 2009. Share balances increased $86.7 million year-over-year and approached $1.1 trillion as the third quarter of 2016 came to a close.

Regular shares accounted for much of the growth in the share portfolio. Total balances for regular shares and deposits increased more than $35 billion, whereas share drafts increased at the greatest rate — 17.0% year-over-year — and reached $164 billion in the third quarter.

Finally, IRA/Keogh balances increased 2.2% year-over-year, and share certificates were up nearly 5% over the same period. Such activity demonstrates the comfort level of credit union members with locking up funds in longer duration deposit products.

The average share balance for the industry increased 4.3% year-over-year. Credit unions in the top 20th percentile reported an average share balance of $10,060. Those in the middle 50th and bottom 20th percentiles reported average balances of $7,052 and $4,365, respectively.

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Member Business Lending

Credit unions across the country added $7.3 billion in member business loans to their balances sheets year-over-year. That’s a growth rate of 14.4%.

Originations of member business loans also posted significant growth. Those are up 16.3% over the same period a year prior.

Although growing in size and popularity, member business loans still accounted for only 6.8% of the total credit union loan portfolio. Average member business loan balances per credit union topped $9.7 million— a 19.2% increase over third quarter 2015.

 

 

 

The median MBL delinquency reached 1.15% in third quarter 2016. That's 2.76 percentage points lower than credit unions in the bottom 20th percentile and 88 basis points higher than credit unions in the top 20th percentile.

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Investments

Credit unions held nearly $380.8 billion in investments and cash as of third quarter 2016. That’s an increase of 70 basis points over second quarter.

Total investments increased slightly as credit unions decreased their non- MBS Fed Agency Debt Instruments in anticipation of a potential rate increase by the Federal Reserve.

The average yield on investments in third quarter 2016 compared to the second quarter fell 1 basis point to 1.34%. Because of the shift in investment composition — increases in cash balances at the Fed accounted for the majority of growth over the past quarter — this 1-basis-point difference was smaller than expected.

The Fed raised rates in December, and average yields are expected to increase. As of Sept. 30, 2016, the average life of a credit union investment is 1.89 years. That’s down from 1.96 in the second quarter and 2.10 in the third quarter of 2015.

 

The median MBL delinquency reached 1.15% in third quarter 2016. That's 2.76 percentage points lower than credit unions in the bottom 20th percentile and 88 basis points higher than credit unions in the top 20th percentile.

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Member Relationships

Credit union membership increased 4.0% year-over-year in the third quarter of 2016. The cooperative movement now serves more than 107 million members.

Of those members, 55.9% use a credit union as their primary financial institution — as measured by share draft penetration, the gold standard in determining a consumer’s PFI. That’s an 81-basis-point increase over Sept. 30, 2015. Additionally, average member relationships have increased 4.8% to $17,505.

Credit union employment and member service has kept pace with member growth. Members per employee — a gauge of the resources a credit union allocates to member service — declined only slightly to 383 in third quarter 2016 versus 385 one year ago.

 

The average member relationship at credit unions increased 4.8% year-over-year. Top-performing credit unions posted an average member relationship of $16,519 as of Sept. 30, 2016. That's $5,205 more than the median. Credit unions in the bottom 20% of the industry have an average member relationship of $6,885.

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Earnings

Investment income increased 9.7% yearover- year and contributed to an 8.8% increase in interest income in the third quarter of 2016. An 8.6% rise in loan interest income also contributed to this growth.

Non-interest income again played a major role in third quarter income growth. Third quarter’s 8.1% increase in total non-interest income was buoyed by a 10.0% increase in other operating income, which is largely attributable to income from mortgage sales on the secondary market.

The net interest margin also improved slightly, rising 3 basis points from Sept. 30, 2015, to 2.89% as of Sept. 30, 2016. However, this remains below the operating expense to average assets ratio of 3.12% and indicates a continued need for non-interest income.

 

The average ROA for the industry fell 2 basis points year-over-year to 0.79% as asset growth outpaced earnings growth. The industry median as of Sept. 30, 2016, was 0.37%. Credit unions in the bottom 20th percentile improved their ROA 2 basis points to 0.00%, whereas the ROA for credit unions in the top 20th percentile fell 2 basis points to 0.80%.

These graphs, rankings, and maps come from Callahan's Peer-to-Peer Analytics. See how Peer-to-Peer can help you created targeted credit union analysis. Request a demo.


Special Section: Marketing, Members, And Market Share

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These graphs, rankings, and maps come from Callahan's Peer-to-Peer Analytics. See how Peer-to-Peer can help you created targeted credit union analysis. Request a demo.