Credit Union Loans Grow at Slowest Pace Since Tail of Great Recession

Credit unions ended 2020 with their slowest loan growth in more than five years as the continued weakness in auto loans and credit card use was compounded by slowing growth in real estate, according to reports released Friday.

CUNA’s Monthly Credit Union Estimates, showed credit unions had $1.19 trillion in total loans at Dec. 31, up 5% from a year earlier.

CUNA chief economist Mike Schenk said the last time loan growth was that low was around 2012. “At that point we were limping out of the Great Recession.”

That wasn’t the only record Schenk noticed. Savings grew 20.6% to $1.62 trillion, contributing to a loan-to-share ratio that fell to 73.6%, the lowest level since March 2015 and down from 84.2% in December 2019.

“A low loan-to-share ratio is arguably good in the middle of an economic crisis because then you can meet your demand for cash,” Schenk said. “On the other hand, there are earning implications related to having a very low loan-to-share ratio, especially in an environment where investments are yielding very close to zero.”

Membership grew a healthy 3.1% to 126.6 million, which means credit union membership was growing seven times faster than population growth, he said.

Credit union first mortgage balances rose 11.1% to $524 billion at Dec. 31. The Mortgage Bankers Association estimated the balance for all lenders rose 4.3% to $11.1 trillion last year.

Mortgages remained the largest source of portfolio growth for credit unions, but the size of the gains has been falling since July.

“Our expectation this year is that there will be a fall in mortgages because there’s going to a dramatic fallback in refinancing,” Schenk said.

Although spring usually brings a spurt in home sales, Schenk said the continuing spread of COVID-19 and questions about the efficacy of vaccines on variants might dampen growth of purchase mortgages this season too.

The Fed’s G-19 Consumer Credit Report showed credit card portfolios at banks and credit unions made seasonal gains in December, but not as strong as years past. And overall portfolios remained lower than year-ago balances.

This month’s report also included the Fed’s quarter report on motor vehicle loans for all lenders, which were $1.23 trillion on Dec. 31, up 3.5% from a year earlier. Growth was 3.9% from December 2018 to December 2019.

CUNA’s report showed credit unions’ total portfolio of car loans fell slightly from November to December, the first time it has dipped since April and May, when the peak setbacks from the pandemic were felt.

But weakness with auto lending had begun well before the pandemic. Growth rates began tapering in the fall of 2018, and month-to-month drops occurred from September to October 2019 and January to February 2020.

Credit unions generally fared worse with new car loans last year, but from November to December the used car portfolio fell 0.3%, the first month-to-month drop since April.

Overall, new car loans ended the year at $144.1 billion, down 3.7% from a year earlier. Used car loans rose 4% to $240.5 billion.

The results were weaker for credit unions with auto portfolios of less than $2 billion, which is to say all but the 15 largest credit union car lenders.

A CU Times analysis of NCUA Call Reports found the Top 15 car lenders held $67 billion in car loans on Dec. 31, up 7.5% from a year earlier. New car loans rose just 1.3% to $27.7 billion, while used car loans rose 12.4% to $39.3 billion.

Results varied widely among the Top 15 car lenders, which together have nearly 20% of U.S. credit union members and assets.

Gains of more than 20% in total car portfolios occurred at Navy Federal Credit Union of Vienna, Va. ($135.7 billion in assets, 9.9 million members) and SchoolsFirst Federal Credit Union of Santa Ana, Calif. ($23.7 billion in assets, 1.1 million members).

But overall declines occurred at three:

1. BECU, Tukwila, Wash. ($26.8 billion in assets, 1.3 million members), where new car loans fell 9.8% to $1.8 billion, while used car loans fell 6.3% to $817.3 million.
2. Security Service Federal Credit Union, San Antonio ($9.8 billion in assets, 803,514 members), where new car loans fell 10% to $1.9 billion, while used car loans fell 7.5% to $2.2 billion.
3. Golden 1 Credit Union, Sacramento, Calif. ($16.3 billion in assets, 1.1 million members), where new car loans fell 9.4% to $2.2 billion, while used car loans rose 3.9% to $2 billion.

The CUNA report also found the number of credit unions fell to 5,298 as of December, down from 5,302 in November and 5,460 in December 2019. Other 12-month changes included:

• Fixed-rate first mortgages rose 14.2% to $401.3 billion.
• Adjustable-rate first mortgages rose 2.1% to $122.7 billion.
• Second mortgages fell 15.3% to $29.8 billion.
• Home equity lines of credit fell 3.2% to $56 billion.
• Loans per member grew 1.9% to $9,406.
• Savings per member grew 16.9% to $12,786.