Credit union loan balances fell 0.14% in the first quarter of 2024, the lowest growth rate since 2011, according to a new report from TruStage.

Loan balances in the quarter were significantly below the 1.6% rise experienced in the first quarter of 2023.

TruStage, formerly known as CUNA Mutual Group, said credit unions with more than $1 billion in assets reported loan balances falling 0.5% compared to a 1.8% jump in 2023, while credit unions with assets less than $20 million reported loan balances falling 1.1%, versus a 1.9% gain last year.

The group said it expects credit union loan balances to rise only 4% in 2024 and 5% in 2025, which would be below the long run average rate of 7.2%. Loan growth will be weak due to higher interest rates on loans reducing the demand for credit and tight liquidity shortening the supply.

“The slowdown in both credit union and bank lending is one of the long and variable lags of tight monetary policy that Federal Reserve Chairman Jerome Powell likes to mention at his press conferences to reduce the inflation rate,” TruStage’s Chief Economist Steve Rick wrote in the report. “If inflation is caused by too many dollars chasing too few goods, then less lending will reduce dollars and therefore inflation.”

TruStage, an insurance and financial services company that monitors the credit union industry, said credit union loan balances rose 0.4% in April, a little more than half the 0.7% pace reported in April 2023, and 4.5% during the last 12 months.

April is historically the beginning of the credit creation season with seasonal factors typically adding 0.2 percentage points to the underlying trend loan growth rate, the group said.

“The slowdown in both credit union and bank lending is one of the long and variable lags of tight monetary policy that Federal Reserve Chairman Jerome Powell likes to mention at his press conferences to reduce the inflation rate.”

 – Steve Rick
Chief Economist
TruStage