Consumers may be turning to credit unions in greater number in 2014, according to a recent study published by the National Association of Federal Credit Unions.
The NAFCU's December Economic & CU Monitor, which provides year-end summaries as well as forecasting analysis for the year ahead, anticipates continued growth as many Americans revert back to the services of smaller entities rather than larger banks. But credit unions are not as optimistic about their mortgage lending business, HousingWire reported, thanks mostly to new waves of regulation aimed primarily at those big banks but applied across all realms of the financial industry.
Survey respondents reported an anticipated loan growth, from 6.7 percent in 2013 to 9 percent in 2014. Also revealed were an expected slowdown in used-vehicle and first-mortgage loan growth, but members generally conveyed optimistic outlooks for the economy in the year to come, specifically in terms of the unemployment rate, gross domestic product and 30-year mortgage rates.
"Credit unions will enter 2014 with a number of positive trends working in their favor," read the summary. "Loan growth is improving and has surpassed share growth, while asset quality and capital ratios are nearing their pre-recession levels. However, uncertainty in the economy and an increasing regulatory burden will present significant challenges for credit unions in 2014."
The monitor forecasted 1.1 billion in projected mortgage originations for credit unions in 2014, down from 1.75 billion in 2013. The refinancing share of mortgage activity is also expected to experience a scale-back, from 60 percent of all credit union applications in 2013 to a projected 40 percent in 2014, according to survey data.
Still, despite the presumed shift in mortgage lending activity, NAFCU members remain positive about the overall economic prognosis and what it means for their businesses. Member growth grew another 5.6 percent during October 2013 for credit unions surveyed in the report, a year-over-year increase of 5.5 percent. As a whole, 2013 has been a year of renewed growth for NAFCU members and as consumers continually offer positive reviews - something that hasn't always been true for larger banks - many are expecting an even more significant infusion of new opportunity in 2014.
David Carrier, the chief economist for NAFCU, expressed some surprise that surveyed members indicated an expectation that next year's growth would continue and even exceed that of 2013.
"We are seeing a lot of new membership," said Carrier. "[Credit unions surveyed] are expecting growth to be even stronger in 2014."
In terms of what has triggered that growth, Carrier referenced a variety of evidence - most of it anecdotal - of big-bank customers who have entered credit unions discouraged with the policies, fees and lack of accessibility they have experienced with larger banks. Many new customers are younger, Carrier said, and the implementation of Bank Transfer Day in 2012 has continued to provide new business opportunities for many credit unions.
Retaining members, gaining new ones
An earlier NAFCU survey - as well as data from the U.S. Consumer Financial Protection Bureau - revealed that satisfaction among credit union customers remains higher than those of their larger counterparts. Better customer service remained a major factor in those reviews, but credit unions have also offered competitive interest rates on loans for mortgages and new cars. The only recurring issue noted by credit union users was that of physical availability - not enough branches or ATMs are present, particularly outside of local markets, for many credit unions who rely heavily on their locally confined customer bases.
The report also revealed an anticipation that loan growth will continue in 2014. Lending for credit cards, vehicles and other real estate activity is expected to expand, which accounts for some of the optimism regarding increased membership despite the reservations concerning mortgage activity. Year-over-year member growth rose to 3.5 percent in September, increased again on a month-to-month basis in October, and is expected to reach 5 percent in 2014.
NAFCU members also made broader economic predictions as part of the study's findings, most of them forecasting modest economic improvement. The rise of gross domestic product is expected to total 2.6 percent, while most expect national unemployment to hover at or just below 7 percent and for the average 30-year mortgage interest rate to level off at 5 percent.
Regulatory concerns aside, a number of transitions will impact the financial industry in 2014. New rules dictating Qualified Mortgage are set to take effect in January, with more emphasis placed on loss mitigation protocol and sound mortgage underwriting techniques. The Federal Reserve's plans for quantitative easing will continue to be closely monitored, as tapering is set to begin in January and will likely influence the trajectory of mortgage interest rates.
Amid all the transition, the credit union industry appears to be in decent standing, anticipating new growth while maintaining strong relationships with its current clientele.