Top 10 CUs' Loan Originations Fall in First Quarter

Total loan originations fell and net interest margins waned in the first quarter for the nation’s 10 largest credit unions.

Meanwhile, Navy Federal Credit Union, the largest by assets, became the first credit union to surpass $100 billion in assets. It ended the quarter with $103.1 billion in assets, and 8.4 million members.

Suncoast Credit Union, Tampa, Fla. ($9.9 billion in assets, 826,311 members) joined the group at No. 10, while Security Service Federal Credit Union, San Antonio, Texas ($9.6 billion in assets, 785,090 members) fell to No. 11.

The group’s annualized return on average assets was 1.31%, up 9 bps from a year earlier, with ROAs ranging from 1.94%, up 55 bps, at BECU, Seattle ($20.5 billion in assets, 1.2 million members) to 0.41%, down 48 bps, at Alliant Credit Union, Chicago $11.6 billion in assets, 452,560 members), according to NCUA call reports posted this week.

The first quarter showed further slowing of loan originations, with a sharp drop in real estate paired with a weak gain for other loans. The group originated $25.9 billion in total loans during the three months that ended March 31, down 1.7% from 2018’s first quarter.

For example, Suncoast had a powerful boost in car loans, and total non-real estate originations rose 11.2% to $828 million. However, real estate originations fell 9.9% to $159.5 million “primarily by interest rate and reductions of refinances. We anticipate originations to be somewhat lower than 2018 for the same reason,” according to a statement from the credit union.

Real estate originations for all 10 credit unions were $6.6 billion for the quarter, down 14.7% from 2018’s first quarter.

Defying the trend was State Employees’ Credit Union, Raleigh, N.C. ($40.3 billion in assets, 2.4 million members) with $948.2 million in real estate originations, up 23.3%. Smaller gains were made at Alliant and Golden 1 Credit Union, Sacramento, Calif. ($12.7 billion in assets, 1 million members).

The group produced $19.3 billion in non-real estate loans in the quarter, up 3.8% from a year earlier.

The biggest gains came from Navy Federal with $10.9 billion in non-real estate loans, up 7.2% and Suncoast with $828 million, up 11.2%.

The biggest exception was First Tech Federal Credit Union, Mountain View, Calif. ($12.6 billion in assets, 567,217 members) with $203.9 million in non-real estate loans, down 17.7%. America First Federal Credit Union, Riverdale, Utah ($11 billion in assets, 1 million members) generated $1.6 billion, down 6.1%.

Slight drops in non-real estate loans occurred at PenFed Credit Union, Tysons, Va. ($24.4 billion in assets, 1.7 million members), SchoolsFirst Federal Credit Union, Santa Ana, Calif. ($15.9 billion in assets, 882,974 members), Golden 1 Credit Union, Sacramento, Calif. ($12.7 billion in assets, 1 million members), and Alliant Credit Union, Chicago $11.6 billion in assets, 452,560 members).

The originations included $203.1 million in commercial loans, up 2.8%. The modest combined gain encompasses wild swings of ups and downs in this small pool of big loans.

The group’s total loan portfolio stood at $182.1 billion as of March 31, up 9.1% from a year earlier. Car loans, which accounted for nearly a quarter of loans, grew slower than average: loans for new cars rose 5.6% to $19.7 billion, while those for used cars rose 8.2% to $22.5 billion.

Portfolio segments with faster-than-average growth included credit cards (+12.2%), private student loans (+93.6%), other unsecured loans (+17.7%) and commercial loans (+28.2%).

The rate of amounts delinquent at least 60 days was 0.82%, up 8 basis points. Net charge offs in the quarter represented an annualized 1.09% of average loans, up 6 bps.

Net income for the group rose 13.6% to $816.8 million for the year’s first three months as the credit unions made strong gains in other operating income, and held expenses and loan loss provisions in check.

Net interest income measured before loan loss provisions had shown growth well above average in previous quarters, but grew only 1.6% to $2 billion in the first quarter. However, loan loss provisions grew in step with loan portfolios, rising 6.5% to $568.1 million.

The group’s annualized return on average assets was 1.31%, up 9 bps from a year earlier, with ROAs ranging from BECU’s 1.94%, up 55 bps to Alliant’s 0.41%, down 48 bps.

The Top 10 contains $262.1 billion in assets and 18.5 million members. Among the nation’s 5,583 credit unions in February, the Top 10 accounted for about 17% of their $1.5 trillion in assets, and 15% of their 119 million members.

Their net income and ROA for the first quarter were:

• Navy Federal earned $423.6 million, up 18.6%. ROA was 1.76%, up 17 bps.
• State Employees’ earned $57.4 million, down 30.5%. ROA was 0.58%, down 29 bps.
• PenFed earned $52.7 million, up 6%. ROA was 0.88%, up 2 bps.
• BECU earned $94.8 million, up 49.8%. ROA was 1.94%, up 55 bps.
• SchoolsFirst earned $44.2 million, up 13.5%. ROA was 1.16%, up 8 bps.
• Golden 1 earned $29.3 million, up 3.4%. ROA was 0.95%, down 2 bps.
• First Tech earned $28 million, up 20.9%. ROA was 0.92%, up 12 bps.
• Alliant earned $11.2 million, down 49.9%. ROA was 0.41%, down 48 bps.
• America First earned $43.5 million, up 58.4%. ROA was 1.65%, up 51 bps.
• Suncoast earned $32.1 million, up 24.3%. ROA was 1.35%, up 20 bps.