The Resilience of Credit Unions: Shaping the Future of Consumer Loans

Introduction

While credit unions have experienced a slight slowdown in growth, they have proven to be more resistant to market fluctuations compared to banks. Despite facing challenges, credit unions have managed to maintain their share and even make gains in specific sectors. This article explores the recent trends in credit unions' consumer loans, highlighting their performance and the potential they hold for the future., based on the Fed’s G-19 Consumer Credit Report and compilations from the Credit Union Times. 

• Credit Unions' Steady Performance in Credit Card Debt: In November, credit unions held $82.6 billion in credit card debt, marking a 12.8% increase from the previous year. Although this growth has been gradually diminishing, it still outperforms the average gain from 2016 to 2022. These figures indicate that credit unions are maintaining their position and even gaining ground in the credit card market, holding 6.4% of the nation's $1.3 trillion credit card balance.

• Non-Revolving Debt: Credit Unions' Rising Share: Credit unions have also made progress in the non-revolving debt category. In November, they held $587.9 billion in non-revolving consumer loans, experiencing a 5.8% year-on-year increase. This growth rate, although slower than previous years, aligns with the seven-year average. Credit unions' share of non-revolving loans reached 15.9% in November, demonstrating an upward trajectory and surpassing their October and November 2022 figures. While credit unions' overall share in the consumer credit market remained stable, their performance in non-revolving loans is promising.

• Comparing Credit Union Performance: Credit unions' credit card balance increase of 12.8% outshines the 8.9% gain reported by PSCU, the St. Petersburg-based payments CUSO, for November. Moreover, while credit unions face challenges in reducing delinquency rates, they have fared relatively better. The credit card delinquency rate for credit unions was 1.90% as of September 30, a 60 basis points increase from the previous year, but still lower than the average delinquency rates of other institutions.

• Leading Credit Unions: Notably, Navy Federal Credit Union, the largest credit union by assets, holds a remarkable 35% of the credit card balances of the entire movement. Excluding Navy Federal, delinquency rates among credit unions rose to 1.44% on September 30, an increase of 44 basis points from the previous year.
  Among the top ten credit unions with the largest credit card balances, there have been notable gains. These credit unions collectively held $38.5 billion on September 30, marking a 16% increase from the previous year. However, it's important to note that delinquency rates within this group also saw a rise, reaching 2.51%, up by 80 basis points from the previous year. Let's take a closer look at some of these leading credit unions:

• Navy Federal Credit Union, located in Vienna, Virginia, boasts an impressive $168.4 billion in assets and serves 13.2 million members. Holding $27.9 billion on September 30, they experienced a 14.8% increase in credit card balances from the previous year. However, their delinquency rate rose to 2.73%, up by 89 basis points.

• Pentagon Federal Credit Union, based in Tysons, Virginia, holds $35.4 billion in assets and serves 2.9 million members. With $2.4 billion in credit card balances on September 30, they saw a substantial 22.2% increase from the previous year. Their delinquency rate rose to 2.92%, up by 62 basis points.

• BECU, located in Tukwila, Washington, has $29.2 billion in assets and serves 1.4 million members. Holding $1.6 billion in credit card balances on September 30, they experienced a significant 17.8% increase from the previous year. Their delinquency rate rose to 0.41%, up by 14 basis points.

• SchoolsFirst Federal Credit Union, based in Santa Ana, California, holds $28.8 billion in assets and serves 1.3 million members. With $1.2 billion in credit card balances on September 30, they saw a notable 21.8% increase from the previous year. Their delinquency rate rose to 2.27%, up by 89 basis points.

• Suncoast Credit Union, based in Tampa, Florida, has emerged as a formidable player in the credit union landscape. With $17.1 billion in assets and a member base of 1.2 million, they have established themselves as a trusted financial institution within their community. Holding $1.1 billion in credit card balances on September 30, their remarkable 26% increase from the previous year showcases their ability to attract and serve a growing number of members.

Conclusion

Despite facing a slowdown in growth, credit unions have demonstrated resilience in the consumer lending landscape. Their steady performance in credit card debt and the increasing share of non-revolving loans highlight their ability to adapt to changing market conditions. While delinquency rates have seen slight increases, credit unions continue to outperform other institutions in managing these challenges.

The success of leading credit unions, such as Navy Federal Credit Union and Pentagon Federal Credit Union, showcases the potential for growth within the industry. Their ability to attract and serve millions of members while maintaining strong financial positions is a testament to the trust and loyalty credit unions inspire.

As consumer lending continues to evolve, credit unions are well-positioned to navigate the changing landscape. By emphasizing their member-centric approach and offering competitive loan products, credit unions can further solidify their market presence and drive meaningful growth in the years to come.

Overall, credit unions have made slow but steady gains in consumer loans, showcasing their resilience and commitment to serving their members' financial needs. With their customer-focused approach and strong performance in the face of challenges, credit unions are poised to shape the future of consumer lending and continue to be a valuable alternative to traditional banking institutions.