Compliance expenses at credit unions have risen by 59% since the implementation of Dodd-Frank, and are expected to rise to 86% over the next three years.
That's according to the latest Economic & CU Monitor from the National Association of Federal Credit Unions, which revealed regulatory and legislative pressures as the overwhelming number one barrier to credit union growth in the next three years. The next three most frequently selected responses among survey recipients were interest rate pressures, risk-management challenges and employee-related costs.
NAFCU also surveyed CUs on how they expect full-time employment to change as a result of rising compliance costs, and staff related to BSA/anti-money laundering regulations topped the list. In just over six years, NAFCU said, most compliance areas at CUs have seen an increase in full-time equivalent employees of at least 75%. The average credit union, according to NAFCU's survey results, today has about four employees working in those fields, though that is expected to rise to seven employees or more within the next three years. Employee responsibilities directed toward IT compliance and mortgage lending are also expected to rise.
The good news is that loan growth is estimated to have risen by 10.37% year-over-year during July, according to NAFCU's data, though membership gains year-over-year actually dropped by 10 basis points to 3.6%. That's in line with the latest CU Trends Report from CUNA Mutual Group, which reported loan balances up 9.6% during July (a seasonally adjusted annualized rate) and an 8.2% increase in savings balances.
Among the other highlights of the two reports:
- The number of credit unions shrunk to 6,105 in July, CUNA Mutual reported, down 14 from June 2016 and a year-over-year decline of 254. That’s an improvement, however, over the 299 lost in the 12 months that ended in July 2015.
- Net worth ratio estimates for July were up by two basis points to 10.93%, according to NAFCU, while loan-to-share ratios rose to 78.8%, up one percentage point from the previous month.
- Net interest margins remain essentially steady since the end of 2015, NAFCU’s data showed, holding at 2.86% in July. Since the end of last year, that figure has varied month-to-month by a only a few basis points, with no significant increases or decreases.
- New vehicle purchases continue to lead credit union lending, growing by 14.77% year-over-year, though that category and several others saw slight declines during July, with only the “other real estate” category seeing a lift in July, NAFCU reported.
- Membership rose by 0.37% during July, a figure CUNA Mutual called “robust” and an increase over the 0.23% gain reported in July 2015. “Memberships are up 4.1% over the past year, the fastest in over a generation, due to rapid job creation and strong demand for new/used auto loans and real estate loans,” CUNA Mutual said.
- The two groups reported slightly differing delinquency statistics, with CUNA Mutual reporting a year-over-year decline from 0.76% to 0.73% in July thanks to a strong economy and double-digit loan growth. Meanwhile, NAFCU estimated a three basis point rise in delinquency rates to 0.78%, adding that July saw increased delinquency rates on credit cards, vehicle loans and first mortgages. CUNA Mutual said it expects delinquency rates to remain in the 0.70% to 0.80% range for the next 12 months.
