Industry Trends: Loans (4Q19)

2019 has been the most productive lending year in the history of the credit union movement. Despite coronavirus uncertainty, strong loan growth and low delinquency bode well for the strength of the credit union balance sheet in the months ahead.

Total household debt has increased for 25 consecutive quarters, according to the Federal Reserve Bank of New York. In the 2019 calendar year, household debt grew 4.4% and surpassed $14.0 trillion for the first time ever. Mortgage debt accounted for 67.6%,or $9.6 trillion, of total debt. That’s an annual increase of 4.7%. Consumer debt increased 3.8% during the year to $4.6 trillion.

Total loans and leases at commercial banks neared $10.0 trillion at year-end 2019, up 3.9% year-over-year according the Federal Reserve Bank of St. Louis. Over the past year, consumers have demonstrated an appetite to take on debt, particularly followinginterest rate decreases in the back half of 2019. This opened up lending channels that financial institutions across the country have successfully served.

Key Points

  • In the fourth quarter, loan production at credit unions nationwide was $151.8 billion, the largest three-month origination volume on record. This is the third consecutive quarter of record-setting quarterly originationlevels.
  • First mortgage originations increased 28.4% from one year ago. At a calendar-year all-time high of $178.7 billion, 12-month mortgage production was 24.7% higher than the next highest year on record.
  • Annual outstanding loan growth at credit unions nationwide was 6.1% as of the fourth quarter. That’s down 2.9 percentage points from year-end 2018.
  • Total delinquency held steady year-over-year at 0.71%. Credit card delinquency continued to inch up, increasing 5 basis points annually to 1.40% in the fourth quarter.

HOUSEHOLD DEBT

FOR U.S. CREDIT UNIONS | DATA AS OF 12.31.19
Callahan & Associates | CreditUnions.com

Total household debt in the United States increased 4.4% annually and surpassed $14.0 trillion for the first time ever.

QUARTERLY LOAN ORIGINATIONS

FOR U.S. CREDIT UNIONS | DATA AS OF 12.31.19
Callahan & Associates | CreditUnions.com

Credit unions originated $151.8 billion in the last three months of 2019. This is the third consecutive quarter of record quarterly loan production volume.

LOAN GROWTH BY TYPE

FOR U.S. CREDIT UNIONS | DATA AS OF 12.31.19
Callahan & Associates | CreditUnions.com

A pullback in indirect and subsequent slowdown in auto lending largely accounted for a deceleration in loan growth, which slowed 2.8 percentage points year-over-year.


The Bottom Line

2019 has been the most productive lending year in the history of the credit union movement. Total originations in the past 12 months reached $551.0 billion, the second time on record (2018) that credit unions have granted more than $500 billion in loansduring the calendar year. Strong loan growth and low delinquency bode well for the strength of the credit union balance sheet. Coronavirus concerns, monetary policy, and consumer sentiment will influence credit union lending in 2020.

This article appeared originally in Credit Union Strategy & Performance.

April 16, 2020

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