Credit unions leaders have long anticipated, and prepared for, a decline in asset quality. Year-end quarterly credit union data shows that descent has arrived.
Credit unions have now pulled back on efforts to draw in new members through channels such as indirect lending and are instead focusing on core members. This has had a knock-on effect on auto lending and loan growth.
Fortunately for credit union members, share growth has risen. That bump could have positive ramifications for personal finance moving forward. Read on to see what other trends appeared in the fourth quarter credit union performance data.
Takeaway 1: Higher Delinquency Has Arrived
DELINQUENCY BY PRODUCT
FOR U.S. CREDIT UNIONS
SOURCE: Callahan & Associates
- Credit union leaders have worried about rising delinquency across products for the past several quarters. However, the fact that delinquency was normal in the context of pre-pandemic performance allayed many fears. That is no longer the case. Total industry delinquency climbed to 0.97% in the fourth quarter, surpassing pre-pandemic norms.
- Delinquency in all but one lending product rose in the fourth quarter. Commercial lending was the lone exception in the credit union portfolio. Most worrying perhaps is the rise in residential real estate. Delinquency in this product has traditionally been low; however, it reached 0.78% in the fourth quarter.
Takeaway 2: Credit Unions Double Down On Members
MEMBERSHIP AND ANNUAL GROWTH
FOR U.S. CREDIT UNIONS
SOURCE: Callahan & Associates
- Credit unions had 2.3% more members in the fourth quarter of 2024 than they did one year earlier. Despite the fact year-over-year growth has decreased, total membership still reached an all-time high of 143.9 million at year-end.
- The dip in growth is the result of credit unions pulling back on certificate specials and indirect lending, which are typically reliable sources of membership growth. Credit unions are reorienting products to capture the favor of members with whom they already have a primary relationship versus attracting new members who might favor rate over relationship.
- Meanwhile, the total number of credit union branches increased by 31 year-over-year. Banks, on the other hand, shed nearly 1,000 locations. As banking deserts become an issue nationwide, credit unions have stepped up to serve communities rejected for their profit potential.
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Takeaway 3: Yields Outpace The Cost Of Funds
YIELD ANALYSIS
FOR U.S. CREDIT UNIONS
SOURCE: Callahan & Associates
- Credit unions widened the gap between the cost of funds and the yield on investments and loans in the fourth quarter. Yield on loans moved up 5 basis points, yield on investments moved up 6 basis points, and the cost of funds moved up 3 basis points.
- Total borrowing fell to 4.2% of assets. Total borrowing balances fell more than $25 billion to $96.9 billion.
- Meanwhile, core deposit growth was stronger in the fourth quarter than in quarters past. All this means a lower cost of funds and better margins.
Takeaway 4: Auto Lending Reflects Credit Union Strategy
ANNUAL GROWTH IN LOANS OUTSTANDING
FOR U.S. CREDIT UNIONS
SOURCE: Callahan & Associates
- The loan portfolio at U.S. credit unions grew 2.8% annually in the fourth quarter. At the same time, new auto lending fell by 6.1% and used auto lending fell by 1.6%, highlighting a change in strategy that is seeing credit unions pull back from indirect lending.
- Given that change in strategy, indirect lending fell 3.6%. The tightened liquidity environment has prompted credit unions to refocus their efforts toward core members rather than sourcing loans to a potentially fickle member.
- The opportunity cost of this new direction means credit unions missed out on the recent bump in U.S. vehicle sales and subsequently lost market share. Credit union auto market share fell to 17.6% of all cars financed in 2024. They were the lowest by far of any lender type.
Takeaway 5: Quarterly Share Growth Outpaces Quarterly Loan Growth
QUARTERLY LOAN GROWTH VS. QUARTERLY SHARE GROWTH
FOR U.S. CREDIT UNIONS
SOURCE: Callahan & Associates
- If quarterly share growth surpasses quarterly loan growth, it’s typically in the first quarter when members receive tax returns. However, share growth in the fourth quarter of 2024 was greater than loan growth — 1.42% versus 1.04%, respectively.
- Although slight, this is a positive development for credit union liquidity, which has been tight in recent quarters. It’s also a positive sign for members. Annual share growth that surpasses the national personal savings rate suggests credit union members are saving more than their non-credit union counterparts.
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See You Next Quarter! CreditUnions.com updates this page with the freshest FirstLook credit union data every quarter, so don’t forget to come back for performance insights into the second quarter of 2025.
