NCUA Data Shows Heavy Job Cuts at PenFed

PenFed Credit Union, the nation’s third-largest credit union, cut 569 jobs, or 14% of its workers, in the fourth quarter as loan originations fell.

CU Times, citing multiple unnamed sources, reported last November that PenFed laid off 200 to 600 people located across numerous states. The layoffs appeared to focus on remote employees who worked in the lending departments of the credit union.

PenFed, based in Tysons, Va., just outside Washington, D.C., ended 2022 with $35.5 billion in assets and 2.8 million members. NCUA data showed PenFed had 3,402 full-time employees as of Dec. 31, down from 3,585 a year earlier and down from 3,971 on Sept. 30. It had 50 part-time employees Dec. 31, up from 45 a year earlier and down from 54 on Sept. 30.

The other nine largest credit unions based on assets had 44,862 full-time employees Dec. 31, up 9.8% from a year earlier and 1.9% from Sept. 30. They had 1,866 part-time employees, up 27% from a year earlier and down 1.6% from Sept. 30.

A combined 80 layoffs from falling mortgage originations were announced last fall by Greenstate Credit Union ($11.4 billion in assets, 411,891 members as of Dec. 31) and Collins Community Credit Union ($1.6 billion in assets, 90,481 members). However, PenFed has yet to confirm or explain last fall’s layoffs. It also declined to comment on this report.

PenFed had been on a fast growth track, and its mortgage originations doubled from 2020 to 2021. Its strategy has been to sell many of its loans, while building its production muscle.

However, last July President/CEO James Schenck said he expected production to fall in the second half of 2022 as the Federal Reserve continued to raise interest rates. In fact, total originations, which were $19.4 billion in the second half of 2021, fell 75% to $4.8 billion in 2022′s second half.

Schenck said last July the credit union was pivoting in the second half “to continue building capital, deposits and liquidity while maintaining credit quality and delivering world-class service to members.”

In a Jan. 26 news release highlighting PenFed’s fourth-quarter results, Schenck said: “We successfully delivered on these strategic priorities.”

Looking forward to 2023, Schenck said, “PenFed will continue to take perfect care of its members by providing great rates and world-class service while building a stronger PenFed through sustainable, risk-balanced growth, and giving back to the community.”

NCUA data showed PenFed’s employee pay and benefits costs were 47.4% of its total non-interest expenses in the fourth quarter, up from 44.3% a year earlier and 45.7% in the third quarter. For the other nine largest credit unions it was 53.1% in the fourth quarter, up from 51.2% a year earlier and down from 54% in the third quarter.

In the Jan. 26 news release, Schenck described gains in the credit union’s net worth and shares during what the news release described as “a challenging economic environment.”

“Building deposits, liquidity and capital were PenFed’s key priorities for the second half of 2022 – and during the fourth quarter we successfully executed on those goals,” Schenck said. “The PenFed family continues to grow based on the value of our products and services. PenFed welcomed over 450,000 new members in 2022, as current members share their stories about PenFed’s great rates and world-class service. We thank all of our 2.8 million members for choosing to save and borrow with PenFed.”

PenFed’s member shares ended the year at $27.7 billion, up 20% from a year earlier and up 2% from Sept. 30.

“Of particular note, PenFed’s certificate balances grew year-over-year by $6.1 billion, a growth rate of 74% as PenFed offered market-leading dividend rates to deliver value to its members and help its members do better financially,” its news release said.

PenFed’s net worth ratio ended the year at 9.52%, down from 9.65% a year earlier and up from 9.33% on Sept. 30. However, it has applied the NCUA’s new risk-based capital ratio, which was 12.62% on Dec. 31, up from 12.44% on Sept. 30.

PenFed closed the fourth quarter with nearly $900 million of capital in excess of required regulatory net worth, which was more than $60 million higher than the third quarter.

NCUA data also showed:

• PenFed’s net income for the three months ending Dec. 31 was $35.4 million, or 0.40% of its average assets for the quarter. ROA was less than half of its 0.95% in 2021’s fourth quarter and slightly lower than its third-quarter ROA of 0.41%. By comparison, ROA for the nine largest credit unions, excluding PenFed, was 1.25% for the fourth quarter, up from 1.09% a year earlier and 1.00% in the third quarter.
• Operating ROA, which replaces loan loss provisions with net charge-offs, was 0.54% at PenFed in the fourth quarter, down from 1.04% a year earlier and up from 0.48% in the third quarter. Operating ROA for the nine other largest credit unions was 1.44% in the fourth quarter, up from 0.82% a year earlier and 1.20% in the third quarter.
• The rate of loans delinquent for 60 or more days was 1.58% in the fourth quarter at PenFed, up from 1.23% a year earlier and 1.38% on Sept. 30. The other nine largest credit unions had a fourth-quarter delinquency rate of 0.99%, up from 0.76% a year earlier and 0.86% on Sept. 30.
• The charge-off rate was 1.16% in the fourth quarter at PenFed, up from 0.57% from a year earlier and 0.82% in the third quarter. The other nine largest credit unions had a fourth-quarter charge-off rate of 0.94%, up from 0.62% a year earlier and down from 1.06% on Sept. 30.
• PenFed sold $513.3 million in first mortgages to the secondary market in the fourth quarter, down 86% from a year earlier and down 65% from $1.5 billion in the third quarter. The other nine largest sold $1.2 billion, down 62% from a year earlier and down 35% from the third quarter.
• PenFed’s total loan originations were $1.7 billion in the fourth quarter, down 83% from a year earlier and down 47% from the third quarter. The other nine largest produced $30.2 billion, down 28% from a year earlier and down 7% from the third quarter.