Credit Union Industry At-A-Glance (1Q19)

Credit union membership grew 4.0% year-over-year and share growth accelerated 65 basis points quarter-over-quarter. What else happened in first quarter?

 
 

Top-Level Takeaways

  • Credit union membership grew 4.0% in the first quarter of 2019, pushing the total membership number to over 118.6 million.
  • Share growth accelerated 65 basis points quarter-over-quarter to 6.3% in the first quarter of 2019. Total deposits stand at just under $1.3 trillion.
  • Asset quality improved year-over-year as delinquency and net charge-offs fell 8 and 3 basis points, respectively.

Credit unions have a business model distinct from other financial institutions — one in which members are owners, and their financial wellness is the credit union’s top priority. At the start of 2019, one clear priority for credit unions was enhancing the entire member experience — from opening a checking account, to applying for a first mortgage, and everything in between.

While rates are important, it's not the only part of the credit union experience that matters. It’s more important than ever for credit unions to invest in technology, products, and services for their members and employees. The rise of fintechs and other competition put pressure on credit unions to enhance members’ digital experience in conjunction with physical, in-branch level transactions. “We’re seeing credit unions investing time and energy into creating experiences beyond rates to attract new members,” says Alix Patterson, chief experience officer at Callahan & Associates.

Industry Performance

The number of credit unions in the country declined from 5,646 in the first quarter of 2018 to 5,451 in the first quarter of 2019. As of March 2019, there were 3,350 federally chartered credit unions and 2,101 state-chartered credit unions. The year-over-year decline of 195 credit unions is consistent with long-running consolidation trends.

Despite industry-wide consolidation, credit union performance metrics continue to improve year after year. Total assets increased 6.3% year-over-year to over $1.5 trillion in the first quarter of 2019. Loan balances increased $77.6 billion over the first quarter of last year. Loan growth slowed 1.8 percentage points, from 9.7% in the first quarter of 2018 to 7.9% in the same three months this year. On the other side of the balance sheet, share growth accelerated in the first quarter, up $70.1 billion annually to $1.3 trillion, a 5.8% increase year-over-year.

Investments and cash grew 1.4% over the past year, a change from negative growth the past six quarters, totaling $395.1 billion as of March 2019. Capital growth also accelerated 2.8 percentage points to 9.7% in the first quarter.

INDUSTRY OVERVIEW

FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.2019
© Callahan & Associates | www.creditunions.com
  As Of 03/31/19 12-Mo Growth (1Q19) 12-Mo Growth (1Q18)
Assets $1,523.9B 6.3% 5.8%
Loans $1,060.1B 7.9% 9.7%
Shares $1,288.3B 5.8% 5.6%
Investments $395.1B 1.4% -3.2%
Capital $175.2B 9.7% 6.9%
Members 118.6M 4.0% 4.3%

Share growth accelerated 13 basis points in the first quarter of 2019, compared to 2018.

Members

Credit unions added 4.6 million members over the year, including 1.1 million in the first quarter of 2019. Annual membership growth decreased 27 basis points year-over-year to 4.0% as of March 2019. In fact, first quarter growth has stayed above 4% for the last three years as more people adopt the industry’s member-focused, not-for-profit financial model.

MEMBERSHIP AND ANNUAL GROWTH

FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.19
© Callahan & Associates | CreditUnions.com

Credit union membership is up 4.6 million members year-over-year, a 20.5% increase over the past five years.

Employees

Credit unions are also investing in their workforce. Full-time employment is increasing at a faster rate than last year, a 37 basis point increase to 4.6% as of March 2019. Comparatively, part-time employment decreased 9.9% year-over-year. Credit unions currently employ 294,000 full-time employees and 25,000 part-time employees. More workers are entering as full-time employees as opposed to part time as credit unions are offering more competitive wages and benefits. The average salary and benefits per full-time equivalent employee was $79,001 as of March 2019 — a $2,625 increase from March 2018.

FULL-TIME AND PART-TIME EMPLOYEES AND ANNUAL FTE GROWTH

FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.19
© Callahan & Associates | CreditUnions.com

Full-time equivalent employee growth of 3.9% kept pace with accelerating membership growth.

Market Share And Member Impact

Credit union market share remains strong in three major loan products — auto, mortgages, and credit cards. In 2019 credit unions have a much larger share of the market in these three areas than they did five years ago.

Credit union auto market share has improved 3.6 percentage points since March 2014. Today, a credit union finances 18.6% of auto loans nationally. First mortgage market share has also grown — it’s up 1.6 percentage points in the past five years to 8.0%. Credit card market share has increased at the slowest rate among the three products — 90 basis points in the past five years to 6.1%.

Credit unions are not only recruiting new members to the movement, they are also enticing members to use more products. A growing membership base runs the risk of diluting penetration metrics; however, that is not currently the case with U.S. credit unions. Credit unions have reported improvements from five years ago in credit card, share draft, and auto penetration. “Although credit unions are doing well at getting members to use them for core checking accounts, we are seeing the credit union value proposition resonate across all segments of the product portfolio – not just checking,” says Patterson.

Total share draft penetration was 58.1% in the first quarter of 2019, the highest percentage yet and up 82 basis points from this time last year. Auto loan penetration increased 60 basis points over the year, to 21.2%. Credit card penetration is at 17.5% for the first quarter of 2019, and real estate penetration held steady at 4.4%.

PENETRATION RATES

FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.19
© Callahan & Associates | CreditUnions.com

Penetration rates increased for almost all products in the past five years.

The average member relationship topped $19,000 for the first time in 5 years, to $19,156 after a $3,175 increase from the first quarter of 2014. Over the past year, loan balances per member were up 5.0% to $8,400, while the average share balance per member, at $10,756, grew at a more tempered pace of 1.6%.

AVERAGE MEMBER RELATIONSHIP

FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.19
© Callahan & Associates | CreditUnions.com

The average member relationship topped $19,000 for the first time, fueled by a $3,175 increase from this time last year.

Wait, There’s More!

This is just one section of the industry trends discussion that appears in Credit Union Strategy & Performance. Read the whole discussion today.

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This article appeared originally in Credit Union Strategy & Performance. Read More Today.

 
 

June 25, 2019


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