Mortgage Originations Drive Top 10 Credit Union Growth

The nation’s 10 largest credit unions increased loan production in the third quarter by 16.5% from a year earlier, with most of the gain coming from residential real estate.

The credit unions’ net income shrank as they recorded larger loan loss provisions, but their returns on assets and net worth ratios remained healthy.

The Top 10 represent 21 million of the nation’s more than 125 million credit union members, and hold $321.3 billion in assets — about 18% of the movement’s total. While they tend to have faster growth and higher margins than smaller credit unions, they are important bellwethers of trends shared with others, whose results will be released by the NCUA in bulk in about a month.

The credit unions originated $39.6 billion in loans in the three months ending Sept. 30, up 16.5% from 2019’s third quarter.

First-mortgage originations grew 42.2% to $$14.6 billion. With rates at historic lows, fixed-rate accounted for 92% all first mortgages. Adjustable-rate first mortgages grew 11.9% to $1.3 billion, while second liens fell 17.4% to $1.3 billion.

Non-real estate originations, which include cars, other consumer lending and commercial lending, rose 6.9% to $23.7 billion.

The slower growth is reflected in portfolio growth. Total loans stood at $203 billion as of Sept. 30, up 7.6% from a year earlier.

New car loan balances grew 1.9% to $20.1 billion as of Sept. 30, while used car loans grew 14.4% to $26.5 billion. Credit card balances nudged up just 0.4% to $25.6 billion.

Suncoast Credit Union, Tampa, Fla. ($12 billion, 908,430 members) fell out of the Top 10 despite a 15% gain in assets, and relatively good ROI of 0.86%, down 42 basis points from 2019’s third quarter. It joined the Top 10 in the first quarter of 2019, and its departure is the first change in the lineup since then.

Suncoast was replaced in the No. 10 spot by Randolph-Brooks Federal Credit Union of San Antonio ($12.6 billion, 921,071 members).

As of June, Randolph-Brooks had all 61 of its branches in Texas, the most among credit unions in the state. The next closest were Security Service ($10.1 billion in assets, 807,581 members) with 38 and Navy Federal with 31.

Randolph-Brooks ended 2019 with $9.7 billion in assets, making it the nation’s 12th largest. It passed the $10 billion mark in assets early this year, and announced record mortgage portfolio and origination growth last month.

For the top 10, net income fell 37.9% to $476.3 million for the third quarter under the weight of heavy loan loss provisions, counted here among expenses. The dollar amount of the drop was $290.4 million from 2019’s third quarter, as income rose by $231.5 million and expenses rose by $521.9 million. Additions and subtractions to net income were:

• +$87.5 million from gains in net interest income (before loan loss provisions). It rose 3.8% to $2.4 billion
• -$56.6 million drop in fee income, which fell 19.6% to $231.6 million.
• +$200.7 million gains for all other operating income, which rose 34.2% to $787.1 million.
• -$74.7 million for increases in employee compensation and benefit expenses. Payroll grew 7.8% to $1 billion.
• -$71.3 million for increases in other non-interest expenses, which grew 7.9% to $977.2 million.
• -$376 million from increases in provisions for loan losses, which grew 66.6% to $940.8 million.

With assets rising and income falling, the Top 10’s annualized return on average assets for the three months ending Sept. 30 was 0.60%, down 54 basis points from 2019’s third quarter but still an ROA many smaller credit unions would envy.

The ROI range was wide, but asset weight decided the average. Five credit unions had ROI of 0.95% or more, but account for only 25% of the group’s assets. Three had ROI under 0.50%, but they account for 60% of assets. They included the two largest — Navy Federal Credit Union of Vienna, Va., and State Employees’ Credit Union of Raleigh, N.C. — plus Golden 1 Credit Union of Sacramento, Calif.

Top 10 loan production and ROA in the three months ending Sept. 30, compared with 2019’s third quarter, were:

1. Navy Federal Credit Union, Vienna, Va. ($131.6 billion in assets, 9.7 million members) originated $6.7 billion in real estate loans, +16.2%, and $13.6 billion in others, +9.9%. ROA was 0.34%, -118 bps.

2. State Employees’ Credit Union, Raleigh, N.C. ($45.9 billion, 2.5 million) originated $1.5 billion in real estate loans, +21.6%, and $1.3 billion in others, -3.8%. ROA was 0.37%, -16 bps.

3. Pentagon Federal Credit Union, Tysons, Va. ($26.3 billion, 2.1 million) originated $2.7 billion in real estate loans, +235%, and $1.8 billion in others, -10%. ROA was 0.70%, -3 bps.

4. BECU, Seattle ($25.6 billion, 1.3 million) originated $714.4 million in real estate loans, -14.2%, and $1.5 billion in others, -9%. ROA was 1.20%, -2 bps.

5. SchoolsFirst Federal Credit Union, Santa Ana, Calif. ($22.6 billion, 1.1 million) originated $1 billion in real estate loans, +41.2%, and $560.7 million in others, -8%. ROA was 0.59%, -57 bps.

6. Golden 1 Credit Union, Sacramento, Calif. ($15.6 billion, 1.1 million) originated $706.5 million in real estate loans, +57.9%, and $936.9 million in others, +37%. ROA was 0.44%, -73 bps.

7. First Tech Federal Credit Union, San Jose, Calif. ($14.4 billion, 609,682) originated $1 billion in real estate loans, +21.6%, and $348.9 million in others, +73.2%. ROA was 1.31%, +33 bps.

8. America First Federal Credit Union, Riverdale, Utah ($13.8 billion, 1.2 million) originated $604.1 million in real estate loans, +7.8%, and $1.7 billion in others, -12.2%. ROA was 0.95%, -38 bps.

9. Alliant Credit Union, Chicago ($13 billion, 539,503) originated $454.2 million in real estate loans, +35.6%, and $869.2 million in others, +21.7%. ROA was 1.15%, +61 bps.

10. Randolph-Brooks Federal Credit Union, San Antonio ($12.6 billion, 921,071) originated $520 million in real estate loans, +73.6%, and $1.1 billion in others, +64.2%. ROA was 1.21%, +22 bps.