3 Loan Products Drive Balances To New High

Second quarter lending puts credit unions on the path to another record-breaking year. As of June 2016, three loan products accounted for more than 81% of the annual growth.

 
 

With 5,959 institutions reporting — representing 99.4% of industry assets — the second quarter of 2016 is on track to be another record-breaking one for the credit union industry. Loan balances topped $834 billion, a 10.7% annual increase, and credit unions broke the previous record of $809 billion set in first quarter 2016.

The increase in loan balances was primarily driven by first mortgages and used and new auto loans. Together, they accounted for 81.6% of total loan growth over the past year. 

LOAN COMPOSITION
For U.S. credit unions* | Data as of 06.30.16
© Callahan & Associates | www.creditunions.com

Loan_Composition

Source: Peer-to-Peer Analytics by Callahan & Associates 
*For 5,959 credit unions

1. First mortgages increased 9.8% annually and accounted for 37.6% of total loan growth.

Credit unions now hold more than $340.7 billion in first mortgage loans, the highest ever reported balance. Originations in the first six months of 2016 totaled $62.6 billion, a 1.7% annual increase over the previous June, and the most loaned since June 2013.

FIRST MORTGAGE GROWTH
For U.S. credit unions* | Data as of 06.30.16
© Callahan & Associates | www.creditunions.com

First_Mortgage_Growth

Source: Peer-to-Peer Analytics by Callahan & Associates
*For 5,959 credit unions 

2. Used auto loans increased 13.4% year-over-year and topped $175.1 billion in June 2016.

Used auto balances at credit unions rose $20.7 billion from June 2015 to June 2016, accounting for 25.8% of total loan growth over the past year. Used auto loans comprise 61.8% of the auto loan portfolio and yield an average loan balance of $11,941.

USED AUTO LOAN BALANCES AND GROWTH
For U.S. credit unions* | Data as of 06.30.16
© Callahan & Associates | www.creditunions.comUsed_Auto_Loan_Growth_and_Balances

Source: Peer-to-Peer Analytics by Callahan & Associates 
*For 5,959 credit unions

3. New auto loans increased 15.7%, adding $14.7 billion to the loan portfolio over the past 12 months.

New auto loans account for 18.4% of total loan growth over the past 12 months, increasing $20.7 billion year-over-year and adding 572,550 new auto loans to the portfolio. The average new auto loan balance was $19,719 as of second quarter. That's a 3.6% jump over June 2015, when it was $19,030.

NEW AUTO LOAN BALANCES AND GROWTH
For U.S. Credit Unions* | Data as of 06.30.16
© Callahan & Associates | www.creditunions.com

New_Auto_Loan_Composition

Source: Peer-to-Peer Analytics by Callahan & Associates
*For 5,959 credit unions 

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Aug. 9, 2016


Comments

 
 
 
  • Looking at Experian data, Average life of an auto loan is 68 months. Granted that is the longest average term in history. We have also had a robust record setting market the last several years. Its important to keep in mind that delinquencies are historically low across all credit tiers. It is important for credit unions to stay diligent and not chase deals that are not in line with their policies. We will see a down turn in the market, no doubt and there will be some financial institutions that get hurt from losses in sloppy underwriting but to say that the overall market is in bubble mode is not true. One thing we saw reinforced through the great recession was that people did not walk away from their car loans. Their auto loan is critical to their every day life and therefore people find a way to pay their loan so that they can get to work, pickup the kids, etc...
    Stuart Holmes
     
     
     
  • As they say, hindsight is always 20/20. I'm curious as to what effects the potential vehicle loan bubble will have on auto lending in the future. I can't help but think that some of the vehicle loans that are being booked by all types of financing institutions are being stretched to the max (i.e. 10 year terms, 150% LTV, etc.), and at some point, this kind of activity cannot be sustained. Like the housing bubble and potentially the student loan bubble, people will find it easier to simply walk away than continue to pay.
    David Murphy
     
     
     
  • I would say if this is the case, we can expect a lot of losses at about the 4th and 5th year. Anyone who makes a 10 year, 150% LTV auto loan probably shouldn't be in the loan business
    C R Keel