Loan Originations Hit A Record High

Annual credit union loan growth was slower in 2018 than in 2017, but there is still evidence that loan demand remains robust.

 
 

Loan balances at U.S. credit unions expanded 9.0% in 2018, slowing from the previous four consecutive years of double-digit growth. Annual credit union loan growth was 93 basis points slower than in 2017 and has now slowed at year-end for each of the past three years. However, 9.0% growth is still evidence that loan demand remains robust.

Aggregate credit union loan balances surpassed $1 trillion at year-end for the first time ever. They totaled $1.1 trillion as of Dec. 31, 2018. The average loan balance per credit union totaled $15,302 as of the fourth quarter, a 3.3% increase from the $14,814 average reported one year prior.

Total loan originations expanded 5.3% year-over-year to hit a record high of $511.2 billion at the end of 2018. Consumer loans continued to drive origination growth at credit unions, with production expanding 8.4% year-over-year to $313.9 billion. The $24.4 billion year-over-year expansion in this segment accounted for 95.3% of the change in total credit union originations throughout year. Originations in other real estate loans and member business loans also increased year-over-year. They grew 6.1% and 3.7%, respectively, from year-end 2017. First mortgage originations fell 1.2% from year-end 2017.

At 40.9%, first mortgages comprised the largest segment of the loan portfolio. Auto loans followed at 35.0%. First mortgage balances grew 9.2% year-over-year to $431.6 billion as of Dec. 31. Auto loans — the fastest growing product in 2018 — increased 10.1% year-over-year to $369.8 billion at year-end.

Despite strong loan demand, total delinquency improved. It fell 10 basis points year-over-year to 0.71% as credit unions reported the lowest year-end level in 12 years. Aside from an increase of 2 basis points in 2016, credit union loan delinquency has decreased every year at year-end since 2010. Notably in 2018, credit unions reported improvements in all loan products except credit cards.

LEADERS IN 12-MONTH LOAN GROWTH

FOR U.S. CREDIT UNIONS >$100M IN ASSETS | DATA AS OF 12.31.18
© Callahan & Associates | CreditUnions.com
Rank Credit Union State 12-Month Growth Total Loans
1 HERCULES FIRST* UT 68.66% $59,383,273
2 NEW DIMENSIONS* ME 59.80% $135,529,836
3 NUVISION* CA 58.65% $1,913,908,478
4 SUNLIGHT WY 52.83% $71,246,015
5 BLUEOX* MI 50.36% $107,546,126
6 PUERTO RICO PR 40.65% $91,279,701
7 PASADENA CA 40.26% $87,838,649
8 PFCU* MI 39.58% $350,782,701
9 FREEDOM NORTHWEST ID 38.28% $133,797,333
10 GLENDALE AREA SCHOOLS CA 36.49% $118,225,746
* Merged in the past year.

Case Study: First Tech FCU Goes All In On Student Debt

CU QUICK FACTS

First Tech FCU
Data as of 12.31.18

HQ: San Jose, CA
ASSETS: $12.2B
MEMBERS: 554,529
BRANCHES: 11
12-MO SHARE GROWTH: 7.21%
12-MO LOAN GROWTH: 5.41%
ROA: 1.05%

First Tech Federal Credit Union ($12.2B, San Jose, CA) offers three different student loan refinancing options, but it doesn’t originate new ones.

The decision is part of an aggressive response to the student debt crisis the big Silicon Valley credit union says is a major issue to much of its membership. The credit union has built a team of specially trained advisors and offers three different loan products that are tailored to members at different life stages and repayment capabilities.

“Our goal is to help our members live the lives they want, have the careers they want, and make the choices they need to make based on what they want and not on what they have to do because of student debt,” says Sandi Papenfuhs, First Tech’s senior vice president of consumer lending.

The formal effort to understand members’ needs began two years after the credit union suspended in-school lending in 2013. Through emails, anecdotal information, member analysis, and SEGs conversations, First Tech found that borrowers fall roughly into two categories: students, and parents who borrow for their children.

It also found that, because of student debt, the former often were delaying life events such as buying homes and forming families. The latter were often delaying retirement.

The credit union now offers fixed-term, balloon, and interest-only loans.

Approximately 90% of First Tech’s student refinance options are fully amortized, fixed-term loans. The credit union determines which option is best for the individual borrower through a personalized, digitized advisory process. Members can reach out through any channel and engage with a student loan specialist specifically trained for the job.

“There are a lot of options available, particularly when the debt is with the federal government, that can include deferment and even in some limited cases, forgiveness,” Papenfuhs says. “We want to make sure they understand all their choices. Then, we can help them decide what’s best for them.”

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April 30, 2019


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