Top 10 Credit Unions Reveal Real Estate Slowdown: CU Times Analysis

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Results from the 10 largest credit unions showed that the mortgage boom that was the mainstay of the 2020 economy may be at its peak.

A CU time analysis of NCUA appeals reports published at the end of January showed the total number of loan arrangements by the Top 10 rose 11.7% to $ 38.7 billion for the fourth quarter. However, growth was slower than the 17% gain recorded a year ago for the third quarter and volume was 2% lower than the third quarter creations.

Real estate was a big part of it. Despite a gain of 21.8% between Q4 2019 and Q4 2020, this was the weakest comparison a year ago for any quarter in 2020 and the volume of 15.1 billion dollars was down from the third quarter. The size of earnings has declined steadily since the 82% gain in the first quarter of 2020.

First mortgage originations increased 24.6% to $ 13.8 billion. Nationally, the Mortgage Bankers Association estimated that fourth-quarter first mortgage originations rose 44.5% to $ 1.01 trillion.

Graph showing the decline in mortgage repayments for credit unions in the fourth quarter of 2020.

Commercial real estate-backed loan origination declined 20.2% to $ 423.1 million.

Creations of cars and everything else unrelated to real estate rose 6.1% to $ 23.6 billion in the fourth quarter from a year earlier, and slightly lower than in the third quarter.

The Top 10 also ended the year with a slight improvement in profits thanks to lower loan loss provisions. Yet their combined loan loss provisions stood at $ 4.1 billion at year-end, a good proportion of 1.1 times their net write-offs of the past two years.

From high loan quality to generous housing, write-off rates continued to be lower in the fourth quarter. It was 0.56%, down 58 basis points from the fourth quarter of 2019. The default rate of 60 days or more also fell 21 basis points to 0.86% as of December 31.

The group’s makeup hasn’t changed this quarter, but Seattle’s BECU ($ 26.8 billion in assets, 1.3 million members) replaced PenFed Credit Union of Tysons, Va. ($ 26.7 billion in assets). dollars in assets, 2.2 million members) at # 3 All comparisons are based on the same cohorts although a few were not in the Top 10 in previous quarters.

The group provides an early indication of trends in income and loan generation. They had $ 331.6 billion in assets and 21.4 million members as of Dec.31, or more than 15% of the membership and assets of credit unions nationwide.

The top 10 generate higher net income as a percentage of average annualized assets than most other credit unions, but tend to share general trends.

Their return on average assets for the three months ended December 31 was 1.01%, compared to an ROA of 0.95% in the fourth quarter of 2019.

Chart showing the full economic statistics of the top 10 credit unions in the fourth quarter of 2020.

Here are the changes in net income in basis points of ROA, the change of 6 basis points being their sum:

  • A 59bp decrease in net interest income (before provisions for loan losses).
  • A 3 basis point drop in commission income.
  • A 23 basis point gain in operating income excluding commissions.
  • A gain of 14 basis points thanks to lower employee expenses.
  • A loss of 6 basis points due to the increase in other non-interest charges.
  • A gain of 36 basis points resulting from lower provisions for loan losses.

The analysis also found that the top 15 auto lenders, based on total auto loan balances as of Dec.31, 2020, held $ 67 billion in auto loans, up 7.5% year-on-year. previous. New car loans increased only 1.3% to $ 27.7 billion, while used car loans rose 12.4% to $ 39.3 billion.

These 15 represent nearly 20% of the members and assets of American credit unions. They include all of the top 10 credit unions by asset, 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).

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