Loans for Cars & Houses Still Falling for Credit Unions in Q3

Results from 10 of the nation’s largest credit unions pointed to auto lending as the chief culprit for a severe drop in loan production in the third quarter.

NCUA data showed the 10 credit unions produced $28.8 billion in loans in the three months ending Sept. 30, down 17% from 2023’s third quarter and down 6% from this year’s second quarter.

That followed a drop in total originations of 9% from $38.1 billion in 2022’s third quarter to $34.6 billion in 2023’s third quarter.

The group is Top 10-ish because it takes out BECU of the Seattle area, which changed its method of recording originations starting in the third quarter of 2023 in a way that essentially took its originations for 2023’s third quarter from $2.7 billion under its old way of counting to zero under its new method. Since then, its originations have been running between $1.5 billion and $1.8 billion per quarter, compared with $1.9 billion to $3.7 billion in the four quarters before the change.

In place of BECU ($29.7 billion in assets, 1.5 million members), the group included Randolph-Brooks Federal Credit Union of San Antonio ($17.5 billion in assets, 1.2 million members), a former member of the Top 10, which has ranked No. 11 in each quarter this year.

NCUA data for the Top 10-ish showed:

• Commercial lending was $670.7 million, up 39% from a year earlier and down 15% from the second quarter.
• First mortgages were $6.4 billion, down 9% from a year earlier and up 8% from the second quarter.
• Home equity lines of credit and other second liens were $3.0 billion, up 20% from a year earlier and up 37% from the second quarter.
• Auto loans, personal loans and credit cards were $18.7 billion, down 24% from a year earlier and down 14% from the second quarter.

One question remaining is whether credit union auto lending suffered more than, less than or about the same as banks and captive lenders. Another question is to what extent credit unions were pushed back by stronger competitors or chose to pull back to preserve margins.

The best answer to the first question will come from Experian’s quarterly State of the Automotive Finance Market report.

In the year through 2024’s second quarter, Experian data showed both banks and credit unions have generally been losing share to captives in the new car market. There has been less change in used car lending, but — strangely — captives have also gained there, especially in the second quarter.

Based on past releases, the third-quarter Experian report will probably be released in early December.

Meanwhile, the Federal Reserve’s G-19 Consumer Credit Report for September will include third quarter numbers on the nation’s total auto loan balances. Subtracting estimates from America’s Credit Unions from the G-19 totals will give a sense of whether credit unions are gaining, although a small but growing portion is now leaking from credit union balance sheets as they sell securities backed by auto loans.

New cars were sold at a seasonally adjusted annual rate of 15.6 million in the third quarter, only 0.2% more than a year earlier and down 0.1% from the second quarter, according to the latest data from the U.S. Bureau of Economic Analysis.

Cox Automotive in September forecast that 2024 retail sales of new cars would be the same 12.7 million as in 2023, while used retail sales would rise 3.1% to 19.9 million.

In the first mortgage market, the Top 10-ish credit unions’ 9% drop over the past year showed they are missing out on the rebound estimated by the Mortgage Bankers Association.

The MBA’s Oct. 27 forecast showed total first-mortgage originations were $479 billion in the third quarter, up 21% from a year earlier. It showed purchase originations rose 5.3% to $357 billion in the third quarter. Refinances, which have been in the cellar, more than doubled to $122 billion.