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Lending

Credit union lending hits five-year high

Membership in federally insured credit unions reaches 95.2 million

House in the grass

Credit unions continue to play a significant role in the lending space as the mortgage finance market experiences new levels of origination activity.

Second-quarter data from the National Credit Union Administration shows federally insured credit unions experienced brisk loan growth, reporting their highest net worth since 2008 and record membership levels in the second quarter.

Loan activity increased 2.3% in the second quarter, and 5.5% over the past four quarters — the strongest growth for that length of time since the beginning of 2009.

"The brisk loan growth shows that federally insured credit unions are meeting the needs of more borrowers and putting their assets to productive use. The net worth ratio rose to 10.5%, its highest level since 2008. Credit union membership continues to reach a new milestone each quarter," said NCUA Board Chairman Debbie Matz.

Membership in federally insured credit unions hit 95.2 million, a record high, in the second quarter of this year — up by 560,670 members, or 0.6%. Nearly 2.1 million Americans have joined a credit union in the last four quarters, NCUA reported.

Matz added that, while the industry is performing well overall, smaller credit unions continue to face challenges with making loans, generating earnings and attracting members.

"The NCUA’s second-quarter call report data validates the fact that credit unions are helping to keep our economy moving by continuing to provide their members with low-cost, high quality loans despite the challenging lower interest rate environment," said B. Dan Berger, president and CEO of the National Association of Federal Credit Unions.

One way that credit unions are providing liquidity is through small business loans, which are up to $43.5 billion, or 8.3%, for the prior 12 months.

"That’s critical because a lot of growth in the economy comes from the small business segment," said Paul Gentile, executive vice president of the Credit Union National Association.

"If you look at the numbers, you can see where credit unions are playing a strong role, specifically if you look at the lending numbers," he added.

One thing that’s on everyone’s mind — in every aspect of the recovery — are rising mortgage rates. In the second quarter, first real estate loans rose to $253.8 billion, up 5.6% on an annual basis.

“I do think if the rates increase, we’ll have a little bit of a chilling effect on mortgages,” said Gentile. “People are more rate cautious today.”

However, Gentile feels confident that rates won’t impact credit unions at least through the rest of the year. The next couple of months will still have robust activity, said Gentile, since it’s the time of year when people buy.

The delinquency ratio and net charge-offs are significantly lower than they were a year ago, which is good news for the credit union industry. “The delinquency ratio for credit unions is still very, very low,” said Gentile, who noted that people are finally able to pay their bills. “That’s a very good sign for the economy overall.”

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