April 27, 2015

Credit Union Trends Report: April 2015 (February 2015)

ECONOMIC, COMPETITIVE, AND THE INTEREST RATE ENVIRONMENT

Despite the adverse winter weather in February, the economy added 264,000 jobs, the unemployment rate fell to 5.5%, personal income rose 0.4%, consumer prices climbed 0.2%, new home sales jumped 7.8%, existing home sales rose 1.2%, home prices rose 1.1%, job openings surged to 5.13 million and the 10-year Treasury interest rate rose 10 basis points to average 1.98%. 

These disparate economic indicators paint a portrait of an economy that is growing at an underlying pace of 3%, even though first quarter GDP numbers will be half that due to adverse winter weather and the West Coast dockworkers’ labor actions. The U.S. economy should expand 3% in 2015, greater than the 2.4% reported in 2014, and 3.25% in 2016. This will close the economies’ output gap and restore the labor market to full employment by the end of 2016. The Federal Reserve will respond to the strengthening economic conditions by raising their fed funds interest target to 2.25% by December 2016.

Credit Union Trends Report Highlight Video:


Report Highlights:

  • During February, credit unions picked up 440,000 new members, credit union loan balances grew at an annual 10.9% pace, bonuses and tax refunds boosted deposit balances 1.9%, firms hired 264,000 workers, the housing market picked up steam, long-term interest rates rose, and the Federal Reserve lowered the economic bar for what would be necessary for them to tighten monetary policy.
  • At the end of February, CUNA’s monthly estimates reported 6,437 CUs in operation, down 37 CUs from one month earlier. Year-to-date the number of credit unions declined by 76, greater than the 49 lost in the first two months of 2014.
  • Credit union savings balances rose 1.9% in February, slightly less than the 2.2% advance reported in February 2014. Remarkably, the additional $18.8 billion in deposits was equal to half the total deposit increase during the past 12 months.
  • The nation’s CUs increased their loan portfolios 0.22% in February, greater than the 0.11% pace reported in February 2014. February is historically the weakest month for loan growth. Loan balances are currently increasing at a seasonally adjusted annualized rate of 10.9% and should remain above 10% for the next two years.
  • Credit union memberships rose a robust 440,000 in February, or 0.4% monthover-month, up from 307,000 reported in February 2014, or 0.3%, to reach 102.3 million. The underlying annual membership growth rate is now 3.8%, the highest in over 25 years.
  • Credit union loan delinquency rates fell to 0.78% in February, down from 0.89% one year earlier and lower than the 1.19% past 10-year average. By year end, delinquency rate should hit 0.75%.
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