U.S. credit unions that offer auto loans, home equity loans and credit cards all showed significant increases in those categories in the first quarter of 2023.
Total loans outstanding increased 17.6% year-over-year in the first quarter, to $1.53 trillion, according to data released last week by the National Credit Union Administration.
One bright spot was auto lending, which increased by $75.1 billion, or 18%, to $493.1 billion. Some industry observers earlier this year
"A continued strong auto market has fueled continued growth, as members are now seeing dealer inventory and taking advantage of the opportunity to replace an older vehicle. This has been a traditional strength for Nusenda, and we continue to perform well in this market," said
At Nusenda, a credit union based in Albuquerque, New Mexico, auto loans increased by 18% over the year, to $1.1 billion. The $4.1 billion-asset credit union's total loans increased 19% year-over-year to $2.8 billion at the end of the first quarter.
In terms of mortgages, Buehler said the higher interest-rate environment is running head-on into a very tight housing market, with historically low home inventories.
"Given the way rates are moving and the lack of home inventory, we think our growth in this area will be sustainable for some time," Buehler said. He added that the credit union is bullish on the home equity market — a strategy other lenders have also turned to as
Mortgages for the industry increased 16.5%, to $669.6 billion, in the first quarter, according to NCUA data.
Many
Mortgage lending in particular has been better than could be expected in a
The rise in credit card balances could be good news or bad news depending upon whether the looming recession is a hard or soft landing, Dollar said.
Credit card balances grew by 15%, to $74.2 billion during the year.
"Most of the [overall loan] growth is in the larger credit unions, particularly those over $1 billion in assets," Dollar said. "These are the credit unions with the most scale enabling them to compete in a very challenging lending market."
Nutmeg State Financial Credit Union in Rocky Hill, Connecticut, saw total loans increase 13% year-over-year, to $421 million at the end of the first quarter.
John Holt, president and CEO of the $559 million-asset institution, said much of its growth was driven by used auto loans, which rose from $45 million a year ago to $63 million.
But Holt warned that the lending environment could soon get more difficult.
"I think mortgage loans will become an increasing challenge, especially if rates go up and the supply of homes continues to be a challenge," he said. "While our liquidity is strong, we anticipate that to decrease in the coming months because of our typical summer cycle and perhaps limiting our loan production as compared to what we saw in quarter one."
Buehler from Nusenda said the higher rate environment has slowed asset sales, and that will slow down those financing opportunities in 2023 and 2024.
He added that the credit union has noticed more activity in its personal and credit card loan products.
"Activity in these products slowed during the pandemic so we think we are seeing some rebound that will probably stabilize in 2024," Buehler said.
Not all credit unions experienced double-digit loan growth in the first quarter.
Total loans increased 8% year-over-year to $1.4 billion at the end of the first quarter for Sharonview Federal Credit Union in Indian Land, South Carolina.
The $1.9 billion-asset credit union lagged behind the industry for several reasons, said David Brand, the credit union's chief lending officer.
One factor at play was Sharonview's attempt to better align its auto loan pricing strategy with yields on a similar investment, the two-year Treasury.
That allowed the credit union to be better positioned to pay deposit rates that are competitive with other banks and credit unions, Brand said.
In addition, Sharonview strategically aligned its indirect auto loan terms with loan investor appetite to ensure a continued source of funding for future indirect loans.
"Overall, we have tightened credit guidelines to further enhance the safety and soundness of member deposits by limiting future risk exposures in the face of continued inflationary headwinds," Brand said.
