The Economy’s Rise Is Lifting Credit Unions Big & Small, New Data Reveals

NCUA data for the second quarter showed the usual disparity in income between large and small credit unions, but it also showed that each broad group is near or surpassing results from before the COVID-19 pandemic.

Net income annualized as a percent of average assets for the three months ending June 30 was a record 1.16%. Callahan & Associates, which has data going back to 2002, showed higher quarterly ROA only twice: 1.97% in 2009’s second quarter as the Great Recession was ending, and in the second quarter of 2002.

ROA improved among all size classes. Credit unions with more than $1 billion exceeded their 2019 peaks, while those with less neared their pre-pandemic peaks.

The NCUA reported results for 5,243 credit unions, which together had $2 trillion in assets and 128.6 million members. For this analysis, CU Times broke them into three roughly equal-sized groups:

• The 4,868 credit unions defined as small (less than $1 billion in assets) collectively had $553.7 billion in assets and 42.1 million members. ROA was 0.76%, up from 0.45% a year earlier.
• The 301 credit unions defined as medium ($1 billion to less than $4 billion in assets) had $617.4 billion in assets and 38.2 million members. ROA was 1.11%, up from 0.61% a year earlier.
• The 74 credit unions defined as large ($4 billion or more in assets) had $828.3 billion in assets and 48.3 million members. ROA was 1.47%, up from 0.73% a year earlier.

The biggest differences were in real estate and overhead.

Credit unions had an average of 399 members for every full-time-equivalent employee, up 1.9% from a year earlier. That productivity measure correlates strongly with size:

• 359 members per employee at small credit unions, up 0.4%.
• 380 members per employee at medium-sized credit unions, up 1.3%
• 463 members per employee at large credit unions, up 3.5%.

Large credit unions had the highest increase in loan production (up 23.5%), but small ones (up 18.4%) did better than medium-sized ones (up 12.5%).

First mortgage originations rose 9.6% to $40.2 billion for large credit unions. They fell 2.3% to $27.3 billion for small credit unions, and fell 4.5% to $26 billion for medium-sized ones.

Originations for non-real estate loans increased 30.4% from 2020’s second quarter with all three groups showing gains close to that average.

Commercial real estate loan production showed strong gains among all three size classes. Large credit unions nearly doubled production to $3.8 billion. Production rose 57% to $1.5 billion at small credit unions and 33% to $3.8 billion at medium-sized ones.

Loan balances were $1.21 trillion on June 30, up 5.4% from a year earlier. As reported previously by CUNA and CUNA Mutual Group, the biggest contributors were residential first mortgages (7.3% to $453.4 billion) and used cars (up 7% to $250.5 billion), while the biggest brakes were new cars (flat at $250.5 billion), second-lien real estate (down 7.2% to $74.5 billion) and credit cards (down 1.5% to $60.3 billion

The NCUA data showed that commercial loans backed by real estate also played a role, growing 16.6% to $95.2 billion and leases, while still a tiny portion of the portfolio, grew 8.2% to $4.9 billion.

NCUA’s quarterly reports released last week also allowed a clear picture of another significant part of the loan pool: Personal term loans. After the U.S. Small Business Administration launched the Paycheck Protection Program in April 2020, it told credit unions to park loan balances under the category for “All Other Unsecured Loans,” but it also created accounts to report the number and balances separately.

PPP loans rose rapidly and the balances have been declining this year as the SBA forgives them, as they were designed to be. However, the forgiveness process seems to be going slower at small credit unions.

PPP loans were $2.2 billion at small credit unions, down 5.6%. They fell 22.2% to $3.4 billion at medium credit unions and 23% to $2.8 billion at large credit unions.

When PPP loans are included, the personal loan line showed a balance increase of only 0.2% over the past year. However, after removing PPP loans, the balance rose 3.7% to $45.9 billion — still below average growth, but significantly better.

These overall loan balance trends generally held for each size group. The biggest exception for small credit unions was used cars, which rose 5.2%, compared with total loan growth of 6%. For large credit unions, the big exception was residential first mortgages, which grew 4.4%, not much better than their 4% overall growth.

But big credit unions have also been selling more mortgages than others.

Credit unions sold $58.5 billion in first mortgages in the first half of 2021, up from $51.7 billion in 2020’s first half, but down from $69.4 billion in last year’s second half.

Large credit unions accounted for 52% of those first-half sales, with medium credit unions accounting for 32% and small ones 16%.