MADISON, Wis.—One year after hitting the 100-million member mark, savings at credit unions have surpassed $1 trillion for the first time in history.
That data comes courtesy of the latest Credit Union Trends Report from CUNA Mutual Group, which found that savings balances at CUs grew at a 5.5% seasonally adjusted annualized growth rate during the 12 months ending in March.
According to Steve Rick, chief economist at CUNA Mutual, the milestone was driven by strong membership growth at credit unions during the last year.
"It's really picked up some of the fastest growth we've seen in almost 20 years,' he told Credit Union Journal. "Basically the current trend right now just in membership growth is growing at about a 4% annualized rate in March. You have to go back to the 1990s to see something like that."
Just as crucial as the growth, said Rick, is the growth in the job market that's fueling it. About 3.2 million jobs are expected to be added this year, he said, and as consumers take new jobs they often join the credit unions those companies sponsor. On top of that, as the industry continues to consolidate and credit unions get larger, more and more institutions are offering increasingly sophisticated deposit products consumers are utilizing when they switch from banks to CUs.
But it's not all external factors like job growth—consumer behavior plays a role, too, as Americans become more conscious of their financial patterns.
"We are seeing a seasonal pattern right now of stronger overall savings coming in, specifically due to oil prices," he explained. "Last June and July when oil prices dropped, consumers started saving money at the gas pump. So [with] less money spent on gasoline basically they've been saving all of this gas dividend, this little windfall from the gas pump, and haven't allocated it to other kinds of spending."
Rick admitted that the 5.5% pace came as a surprise to him. Rick said that he and a group of other credit union economists—including CUNA's Bill Hampel and Mike Schenk—had predicted savings growth would only stand at 4% this year.
One element of the milestone that's remarkable, added Rick, is that credit union lending is booming right now, with an 11% annualized growth rate as of March.
"That's incredible—we haven't seen that in over a decade," he said. "So having all the savings come in is helping to fund all this loan demand on the other side of the balance sheet." What makes it even more impressive, he said, is that when lending is booming, savings are usually weak.
The bulk of that boom in lending is coming in the auto lending arena, where balances on used auto loans saw a seasonally adjusted annualized growth rate of 14.9%, the fastest pace since November 1999. New auto loan balances grew at 24.2%, the fastest pace on record.
Mortgage balances also jumped by 3.1%, up from a 2.3% increase the previous year. CUNA Mutual said that's largely due to a surge in loan applications during January and February when rates fell. As of February, contract rates were at 3.71% on a 30-year fixed mortgage, down 60 basis points from the previous year.
On the other hand, adjustable rate mortgages (ARMs) have declined in popularity, with balances falling by 1.3%. ARMs made up 30% of total first mortgages at CUs in March, compared to 35% in March 2006, before the housing crisis started. Home equity loan balances were also down by 1.4% in March as members paid down lines of credit with bonuses and tax refunds. CUNA Mutual cautioned, however, that those declines may not represent the whole picture, since seasonal factors make March the weakest month of the year for home equity loan growth.
More Than A Big Number?
But is the $1 trillion mark anything more than just a big number? Rick said it sends a message to the competition and to the marketplace.
"It puts us into the category of the big leagues, because once you start getting into the $1 trillion range, people sit up and start taking notice that credit unions are a real player out there and they do have a substantial amount of American savings," he said. "We're growing faster than the U.S. economy."
One CFO, however, was skeptical of what the milestone means in the grand scheme of things for credit unions.
"I think it is a continued testament that credit unions are growing their business and remaining sustainable," Jason Peach, CFO at West Community CU in O'Fallon, Mo., told Credit Union Journal. "However, I think the more important context is our market share and if that has changed at all. If not, I am not sure it is worth significant celebration other than it is a very large, round number."