Banks on average grew their loan portfolios by 5% over the last 12 month period. Credit unions grew their portfolios by 10%. Is this trend going to continue?

With credit unions charging less for loans and paying more for deposits, a case can be made that this will be the norm for some time to come. Credit unions should be anticipating gaining more customer relationships at the expense of the banks.

But how does the size of the credit union affect the mix? The 219 credit unions with an asset size greater than $1 billion grew their loan portfolios by 12% while the 238 credit unions with a size between $500 million and $1 billion grew their portfolios by 10%. The table below illustrates that the majority of this loan growth is firmly entrenched in the larger credit unions.

The 457 credit unions with assets greater than $500 million can be expected to continue to outgrow, on average, the smaller credit unions due to their ability to utilize economies of scale in marketing and their superior demographic characteristics. Much of the growth will come from outside of basic consumer lending as credit unions become more aggressive in commercial and industrial lending.

IDC’s credit union rankings should be used to evaluate the performance of individual credit unions and assess the overall financial condition of the institution.

Banks ranked 200 or more (Superior) in loan quality by IDC (2,120 banks), grew loans at 12% over the past year and had assets and loans equal to the 219 credit unions with assets over $1 billion. Small, high quality banks with domestic deposits continue to match their credit union competitors.

The 1,070 banks IDC ranked “Excellent” (165 to 199) in loan quality grew loans at 10% and had total loans of $580 billion compared to the 238 credit unions with assets greater than $500 million and less than $1 billion ($167 billion in assets) with loan growth also at 10%.

Even the 1,211 banks with domestic deposits ranked “Average” (125 to 164), with loans of $707 billion, grew at 10%.

Total bank loan growth was held down due to low growth in poor quality banks and large banks with foreign deposits.