Lending By The Numbers (2Q17)

Strong loan production across all product segments underpins the industry’s lending momentum.

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Momentum on both sides of the credit union balance sheet continued through the first half of the year.

Loan growth outpaced deposit growth for the fifth consecutive year. The industry’s loan-to-share ratio hit 79.6% in the second quarter; year-over-year, that’s a 1.9-percentage-point increase. June 30, 2017, also marked the 12th consecutive quarter that credit unions have posted double-digit annual loan growth. The portfolio’s annual growth of 10.8% was 29 basis points faster than in second quarter 2016.

Total loan balances surpassed $900 billion and wrapped up second quarter at $923.3 billion. Credit unions have added nearly $27.8 billion quarter-over-quarter and $90.0 billion annually to the industry’s loan portfolio.

The nation’s financial cooperatives posted double-digit annual growth in four out of six loan categories. First mortgages and auto loans grew 10.3% and 13.6%, respectively, and together comprised more than 75% of the total loan composition with first mortgages accounting for 40.7% and auto accounting for 34.8%.

Auto loans might lag behind first mortgages for portfolio share, but they are gaining ground. The share of the loan portfolio held by auto loans at mid-year was a 20-basis-point increase quarter-over-quarter and an 80-basis-point increase annually. The industry’s share of the auto finance market has likewise improved and reached 18.9% in second quarter.

Strong loan production across all product segments underpins the industry’s lending momentum.

Quickly find out if your credit union is keeping pace with the industry’s robust lending numbers with Callahan’s analytics software. Learn more today.

Although the relative dollar volume for other real estate and member business lending (MBL) is less than consumer and first mortgage loans, these two segments recognized the largest year-over- year origination growth 17.0% and 26.6%, respectively. Notably, annual growth for MBL originations accelerated 10 percentage points as credit unions reaped rewards from greater flexibility in commercial lending. The amount of loans granted year-to-date for the largest loan segment, consumer loans, reached $142.9 billion and grew 8.8% year-over-year.

Despite loan income surpassing $20 billion in the second quarter and growing 8.9% annually, the average loan yield of 4.54% represents a continued decline. Look for limited, gradual effects in income during the coming quarters as rising interest rates force repricing.

Click the graphs below to enlarge and then continue reading to see how Total Choice FCU has driven down delinquencies through a combination of aggressive collections and financial counseling.

Loans have expanded at a double-digit rate for 12 consecutive quarters. Credit unions in the top 20th percentile posted average loan growth that surpassed 10% at mid-year.



Total Choice Federal Credit Union has sharply driven down delinquencies through a combination of aggressive collections and financial counseling.

When CEO Mary Vedro joined the credit union as COO in May 2013, she found delinquency rates across the loan portfolio high enough to threaten the Louisiana credit union’s viability.

The credit union’s attitude toward lending and collections was just too lax, she says.

Hiring a new collections manager and getting board support for active collections were critical first steps in the rapid descent of delinquencies that occurred none too soon for the small credit union.

I knew if we didn’t do something, our delinquent loans could become the death of us, Vedros says. Once we started enforcing our rights, members started realizing we were serious.

Total Choice also got serious about showing members another way to approach finances. It instituted a robust counseling program targeted at folks who have either been turned down for a loan or have fallen behind on payments.

The credit union’s certified financial counselors teach members money management skills, debt reduction, and how to avoid predatory lenders. The counseling process also includes a budget analysis, help developing a monthly budget, and follow-up sessions.

Among other things, counselors teach members how to control spending and reduce dependency on credit; discuss ways to enjoy a fulfilling frugal life; and help members understand the amount of credit they can afford, speed up debt reduction and cut interest expenses, and resolve errors on credit reports.

The counselors meet with their clients approximately four months after the initial visit to review and revise plans, and the results are usually promising.

It’s a true blessing to see members’ joy when their credit rating has improved and their financial life is more secure, Vedros says.

Strategy Performance 2Q 2017

Credit unions are indeed having an outstanding 2017 right on the heels of a very strong 2016 and 2015. Eliminating barriers and connecting with members distinguishes credit unions from other financial institutions and makes the movement stronger than it’s ever been. Learn what the industry’s most successful credit unions are doing in this issue of Strategy Performance.


September 1, 2017

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