Results for the 10 largest credit unions showed that the mortgage boom that was the pillar of the 2020 economy might be cresting.
A CU Times analysis of NCUA Call Reports posted in late January showed total loan originations by the Top 10 rose 11.7% to $38.7 billion for the fourth quarter. However, the growth was slower than the 17% year-ago gain for the third quarter and the volume was 2% lower than third-quarter originations.
Real estate was a major part of that. Despite a 21.8% gain from the fourth quarter of 2019 to the fourth quarter of 2020, it was the weakest year-ago comparison for any quarter in 2020 and the $15.1 billion in volume marked a decline from the third quarter. The size of the gains has been dropping steadily since the 82% gain in 2020′s first quarter.
First-mortgage originations rose 24.6% to $13.8 billion. Nationally, the Mortgage Bankers Association has estimated that fourth-quarter originations of first mortgages rose 44.5% to $1.01 trillion.
Originations of commercial loans backed by real estate fell 20.2% to $423.1 million.
Originations for cars and anything else not tied to real estate rose 6.1% to $23.6 billion for the fourth quarter compared with a year earlier, and slightly lower than the volume for the third quarter.
The Top 10 also ended the year with a slight improvement in earnings as loan loss provisions fell. Still, their combined allowances for loan losses stood at $4.1 billion at year's end, a healthy 1.1 times their net charge-offs for the past two years.
Whether it reflects high loan quality or generous accommodations, charge-off rates continued to be lower in the fourth quarter. It was 0.56%, down 58 bps from 2019's fourth quarter. The rate of delinquencies of 60 days or more also fell 21 bps to 0.86% at Dec. 31.
The composition of the group did not change this quarter, but BECU of Seattle ($26.8 billion in assets, 1.3 million members) rose to replace PenFed Credit Union of Tysons, Va. ($26.7 billion in assets, 2.2 million members) at No. 3. All comparisons are based on the same cohorts even though a few of them were not in the Top 10 in earlier quarters.
The group provides an early indication of trends for income and loan production. They had $331.6 billion in assets and 21.4 million members as of Dec. 31 — more than 15% of the nation's credit union members and assets.
The Top 10 generate higher net income as a percent of average annualized assets than most other credit unions, but tend to share overall trends.
Their return on average assets for three months ending Dec. 31 was 1.01%, up from ROA of 0.95% in 2019's fourth quarter.
Here are the changes to net income in terms of basis points of ROA with the 6-basis-point change being their sum:
- A 59 bps drop in net interest income (before loan loss provisions).
- A 3 bps drop in fee income.
- A 23 bps gain in non-fee operating income.
- A 14 bps gain from lower employee expenses.
- A 6 bps loss from higher other non-interest expenses.
- A 36 bps gain from lower provisions for loan losses.
The analysis also found the 15 largest auto lenders, based on total car loan balances as of Dec. 31, 2020, held $67 billion in car loans, up 7.5% from a year earlier. New car loans rose just 1.3% to $27.7 billion, while used car loans rose 12.4% to $39.3 billion.
Those 15 represent nearly 20% of U.S. credit union members and assets. They include all of the Top 10 credit unions by assets except First Tech Federal Credit Union of San Jose, Calif. ($13.8 billion in assets, 619,537 members) and Alliant Credit Union of Chicago ($13.5 billion in assets, 550,400 members).
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.