Consumer Lending Drives Loan Growth In Third Quarter 2013

As consumers regain confidence, auto and other consumer lending categories are surging.

Third quarter data for 5,799 credit unions is currently available through Callahan & Associates FirstLook program. These credit unions, which represent 90% of the industrys assets, reported outstanding loan balances increased 7.5% over September 2012. This is up from the 5.9% loan growth reported in the second quarter of 2013. Loan growth, which surpassed share growth for the first time in five years last quarter, is now nearly three percentage points higher than share growth for FirstLook credit unions.

First mortgages outstanding, the largest component of the credit union loan portfolio, increased 8.3% year-over-year; other real estate loans decreased 5.5%. Rising housing prices makes the mortgage portfolio an area to watch in coming quarters according to S&P/Case Shiller, prices were up 12.0% year-over-year in September.

Although the overall real estate portfolio increased, the real growth in the lending portfolio comes from consumer categories. Third quarter 2013 loan growth within individual components of the portfolio versus third quarter 2011 growth illustrates the strength of consumer components.

LOAN GROWTH 3Q 2011 VS. 3Q 2013
Data for 5,799 FirstLook Credit Unions as of September 30, 2013
© Callahan & Associates |


Source: Callahan & Associates Peer-to-Peer Analytics


Auto loans are resurging across the country. According to a Nov. 1 article from, the third quarter marked the seventeenth consecutive quarter of improving used auto sales. Analysts are predicting that October will be the best used car sales month in more than six years; new car sales are projected to increase 14.2% over October 2012.

Accordingly, the credit union auto loan portfolio is expanding. New auto loans, which had decreased 10.1% in the third quarter of 2011 for FirstLook credit unions, were up 12.5% as of third quarter 2013. Used auto loans were up 10.4% annually for third quarter FirstLook credit unions. American Eagle Credit Union ($1.4B, East Harford, CT) grew its outstanding auto loan balances by 80.8% to more than $100.8 million as of September 30, illustrating the opportunity to serve consumers who are replacing aging cars.

Through September, credit unions had a year-to-date auto loan market share rate of 14.7%, down from the 15.2% of auto loans they captured in the first nine months of 2013. Although total market share was down, the number of auto loans made at credit unions was up more than 130,000.

Credit Cards

Auto loans arent the only consumer-lending component in which FirstLook credit unions have posted substantial increases. Credit card balances, which grew 3.5% in September 2011, increased 8.1% over September 2012. The number of credit card accounts grew 18.9%, pushing the average balance per credit card down to $2,473 from $2,714 in the third quarter of 2012.

The increase in the loan portfolio has led to an increase in annualized interest income over the second quarter. As a result, the net interest margin ticked up slightly for FirstLook credit unions. The net interest margin in the third quarter was 2.80%, up two basis points from 2.78% in the second quarter. This is the first quarterly increase reported in this metric since the second quarter of 2010. The increase was due to a one-basis-point increase in interest income to average assets and a one-basis-point decrease in interest expense as a percent of average assets. The net interest margin is a crucial component of a credit unions bottom line.

First mortgage growth has dominated the headlines since the Great Recession ended, but the growth in consumer lending is proving the strength of other components in the loan portfolio. With consumer loan growth picking up and real estate continuing to grow, the lending portfolio at credit unions looks strong.

November 12, 2013

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