Credit Unions Increase Commercial RE Loans in Q1

Credit unions originated commercial real estate loans at half the rate of others in their portfolios in the first quarter, and their share of the national balance slipped.

A CU Times analysis of NCUA data showed 839 of the nation’s 5,175 credit unions granted $7.4 billion in commercial loans backed by real estate in the first quarter, up 15.1% from 2020’s first quarter. Total loan growth was 29% and commercial real estate loans represented 4.1% of credit union’s total loan portfolio as of March 31, down from 4.6% a year earlier.

Credit unions also wound up with a lower share of commercial real estate loans held nationally based on a comparison of NCUA data and quarterly commercial real estate data released June 14 by the Mortgage Bankers Association of Washington, D.C.

The MBA’s report showed total commercial real estate balances among all lenders grew 1.1% from $3.88 trillion on Dec. 31, 2020, to $3.93 trillion by March 31. In the 12 months ending Dec. 31 it grew 5.8%.

The balance of commercial real estate loans at credit unions was $78.9 billion as of March 31, down 10.7% from $88.4 billion on Dec. 31. That gave credit unions a 2% share of all real estate-backed commercial loans on March 31, down from 2.3% at the end of 2020 and 2.1% a year earlier.

Loans for apartments and other multifamily properties were a major part of the total. The MBA found multifamily account balances grew 1.7% from $1.69 trillion on Dec. 31 to $1.72 trillion on March 31. In the 12 months ending Dec. 31 they grew 8.2%.

Jamie Woodwell, the MBA’s vice president of commercial real estate research, said the pandemic-era growth in commercial and multifamily debt outstanding continued during the first quarter, but the growth was not evenly distributed.

“All of the major capital sources increased their holdings of commercial and multifamily mortgages during the quarter, but almost two-thirds of the overall growth came from multifamily properties, with 80% of that multifamily growth coming from federally-backed agency and GSE mortgage-backed securities and portfolios,” Woodwell said.

“As the uncertainty from the COVID-19 pandemic wanes, lenders will have greater clarity into the different properties and property types and be in stronger positions to make new loans,” she said.

Credit unions had $14 billion in multifamily commercial loans on their balance sheets as of March 31, down 16.7% from Dec. 31. That translates into a 0.82% share of the nation’s multifamily loans outstanding, down from 1.00% on Dec. 31 and 0.85% share at the end of 2019.

Loan quality also remained high. At credit unions, net charge-offs for the three months ending March 31 were $5.2 million, 19.5% lower than in 2020’s first quarter. The net charge-off ratio was 0.30% for the first quarter. The delinquency rate was 0.42% as of March 31, down from 0.43% a year earlier and on Dec. 31.