At year-end 2018, more members are choosing credit unions than ever before.
A full decade after the Great Recession, credit unions are still finding ways to engage members, build relationships, and compete in the financial services industry. At fourth quarter, credit unions are reporting annual improvements across the board, including increases in penetration rates, market share, and yields, and a decrease in delinquency.
This Valentine’s Day, Callahan recapped the industry’s performance trends over the past three months, highlighted credit union success stories, and identified areas of opportunity during its quarterly Trendwatch.
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No. 1. More Consumers Have Moved Toward Credit Unions In The Decade Following The Great Recession
An underlying but undeniable theme of this quarter’s Trendwatch is how credit unions have fared in the 10 years following the 2008 recession. Inherent to the industry’s success has been a steadily growing membership base, which has increased 31.0% in the last decade to 117.8 million. The not-for-profit credit union model offers value to members and consumers, in turn, are increasingly making cooperatives their financial institution of choice.
The average member relationship reached $18,775 in 2018, up $5,000 since 2008. The 117.8 million members have continued to expand and solidify their credit union relationships, as well. Share draft penetration, a measure of whether the credit union is a member’s primary financial institution, is up 11.7 percentage points since 2008, to 57.6% of members. Credit card (17.5%) and auto (21.2%) penetration also increased in the last decade, up 3.3 and 4.1 percentage points, respectively.
Since 2008, credit union assets are up 78.8%, to $1.5 trillion. In that time, loans and shares expanded by 83.9% and 78.8%, to $1.1 trillion and $1.4 trillion, respectively.
PENETRATION RATES AND 10 YEAR CHANGE
FOR U.S. CREDIT UNIONS | DATA AS OF 12.31.18
© Callahan & Associates | CreditUnions.com
New and existing members continue to increase their credit union relationship.
Market share trends illustrate a clear pattern of consumer movement towards cooperatives. Auto market share has expanded 4.4 percentage points since 2008, as credit unions now finance more than one in every five auto loans originated nationwide. Over the same period, credit unions have also found ways to gain share in the mortgage market, funding 8.3% of first mortgage loans, up 3.6 percentage points. As the 10th anniversary of the Great Recession passes, credit union and consumer values continue to align, and the future looks bright for both.
CREDIT UNION MARKET SHARE
FOR U.S. CREDIT UNIONS | DATA AS OF 12.31.18
© Callahan & Associates | CreditUnions.com
All major loan products see market share improvements since the aftermath of the recession as consumers increasingly choose the cooperative financial model.
No. 2. Total Revenue Rises 13.0% In 2018 While Credit Unions Continue To Return Value To Their Members
Total revenue increased 13.0% in 2018 to $74.5 billion, a 3.4 percentage point acceleration from revenue growth reported in 2017. Since 2008, credit unions have added $20.3 billion in annual revenue, a 42.5% increase. Broken out, interest income expanded 14.0% year-over-year in the wake of the Fed’s interest rate hikes, while fee and other operating income grew 5.8% and 14.2% year-over-year, respectively.
Yield on loans and average cost of funds both increased 14 basis points in 2018. As credit unions benefit from gradual loan repricing, they are also returning value to members in the form of increased savings rates. Total dividends are up 30.3% at year-end 2018 to $8.4 billion, the largest dollar amount credit unions have returned to their members in the form of dividends since 2010.
TOTAL REVENUE AND ANNUAL CHANGE
FOR U.S. CREDIT UNIONS | DATA AS OF 12.31.18
© Callahan & Associates | CreditUnions.com
Total revenue expanded 13.0% to $74.5 billion in 2018. Despite a favorable lending climate, credit unions are returning that value to members in the form of dividends.
No. 3. Delinquency Reaches Lowest Year-End Level Since 2006
Total delinquency decreased 10 basis points year-over-year to 0.71%, the lowest year-end level since 2006. Aside from a 2-basis-point increase in 2016, delinquency has decreased at each year-end since 2010. Excluding credit cards, every loan product saw delinquency improvements in 2018. First mortgage delinquency fell 7 basis points annually, to 0.55%, 1.7 percentage points below its year-end post-recession high in 2010. Commercial loans for members posted the largest delinquency improvement in 2018, down 1.4 percentage points in the last year to 0.59%.
Credit cards are the only loan product with rising delinquency in 2018, up 6 basis points to 1.35%. The fifth consecutive annual increase, four quarter credit card delinquency represents the highest year-end rate since 2010. With available lines of credit up 11.1%, 3.5 percentage points higher than the 7.6% increase in credit card loan balances, and utilization is down 37 basis points to 31.8%, credit unions must continue to monitor both the effectiveness and risks associated with increasing credit lines at a faster pace than usage.
DELIQUENCY AND ANNUAL CHANGE
FOR U.S. CREDIT UNIONS | DATA AS OF 12.31.18
© Callahan & Associates | CreditUnions.com
Except credit cards, credit unions decreased delinquency across all lending products in 2018.
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