Strong Loan Trading Continues Into Q1 at Alliant

Loan trading rose to record levels last year as savings surged and lending was uneven, and this year Alliant Credit Union is reporting its activity continues to be strong.

The Chicago credit union ($14 billion in assets, 586,435 members) sold $325.3 million in loan participations in the three months ending March 31, more than eight times the $38.7 million sold in 2020′s first quarter.

Alliant’s purchases fell 15% to $340.2 million as full loan purchases fell 18% to $251.1 million, and purchases of participations fell 4% to $89.2 million.

First-quarter sales included commercial real estate participations to six different credit unions on a multifamily property in suburban Chicago and another on a large, high-performing recreational vehicle resort community in the northeast. Alliant also sold four pools of consumer loans secured by recreational vehicles.

“We’re seeing significant momentum as we expand our partnerships with other credit unions that seek loans backed by institutional-quality properties,” Charles Krawitz, an Alliant vice president who leads its commercial lending and loan trading, said. “Furthermore, our national network of commercial mortgage bankers allow us access to high-quality transactions, and those relationships have deepened as we meet with continued success.”

While Alliant seeks to mitigate risk in its loan portfolio by buying and selling loan participations, the credit union retains servicing for loans that it sells. A May 21 news release from Alliant said its servicing policy is designed to ensure that the loans continue to be serviced as Alliant’s own and limits volatility in servicing. It said one result has been loss rates below industry standards across its loan participations.

One recent buyer of a participation for a multi-family property in suburban Chicago was Northrop Grumman Federal Credit Union of Gardena, Calif., located 14 miles south of Los Angeles ($1.5 billion in assets, 65,483 members).

“This well-maintained property is located in a strong suburban Chicago submarket, and the sponsors have considerable experience in the multifamily asset class and with this specific property,” Duane Hewlett, Northrop Grumman FCU’s director of commercial real estate portfolio management, said.

Alliant’s first-quarter acquisitions include $89 million in participations in two consumer solar loan pools. Although Alliant purchased the solar loan participations from two credit unions, the loans were originated by two online banking fintechs.

“Solar loans complement other types of consumer products in which we are experienced, such as home equity lines of credit and mortgages, with an attractive risk-return ratio because borrowers tend to pay off their solar loans when they sell or refinance their homes,” Krawitz said. “Loan purchases provide the opportunity for our members to benefit from a growing sector while we explore partnering with fintech originators.”

Callahan & Associates reported May 12 that credit unions held $1.18 trillion in loans as of March 31, up only 4.4% from a year earlier, while savings were $1.71 trillion, a 23.2% gain that is the largest on record. Rather than just buying more low-yield securities, many credit unions increased their purchases of loans and loan participations.

Among all credit unions, NCUA data showed sales of full loans and loan participation rose only 2% to $10.8 billion from 2018 to 2019, but rose $24% to $13.5 billion in 2020. Purchases, which were flat from 2018 to 2019, rose 65% to $27.7 billion in 2020.

Alliant ranked seventh last year for total sales of full loans and participations. Those with more were:

• Pentagon Federal Credit Union of Tysons, Va., in the Washington, D.C. metro area ($26.7 billion in assets, 2.2 million members) with $1.6 billion in total sales, up 240%.
• Evansville Teachers Federal Credit Union of Evansville, Ind. ($2.3 billion in assets, 239,114 members) with $1.1 billion in total sales, up 90%.
• Northwest Federal Credit Union of Herndon, Va., in the Washington, D.C. metro area ($4.2 billion in assets, 245,182 members) with $954.5 million in total sales, up eight fold, or 736%.
• Digital Federal Credit Union of Marlborough, Mass. ($10.1 billion in assets, 916,982 members) with $631.3 million in total sales, down 12%.
• Connexus Credit Union of Wausau, Wis. ($3.2 billion in assets, 382,638 members) with $626.3 million in total sales, up 39%.
• Financial Partners Credit Union of Downey, Calif., near Los Angeles ($1.8 billion in assets, 85,125 members) with $468.1 million in total sales, up 161%.