1Q 2022: Burst in CU Loan Growth; Deposits Start Plateauing

Analyzing numbers at the office

The U.S. credit union industry’s aggregate balance sheet ended first-quarter 2022 by experiencing a healthy boost in loan growth contrasted by a noticeable downshift in deposit growth compared to the year-ago period — led by first mortgages (home loans), used autos, credit cards, and business/commercial loans.

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While outstanding deposits hit a new record high, the huge annualized increases credit unions experienced each quarter over the past two years in members flooding cash into their checking and savings accounts are finally slowing down and plateauing.

The First Quarter 2022 Trendwatch webinar (view the slide presentation here) hosted by Callahan & Associates this past week showed that the industry was still operating under one of the most unusual modern-day periods in the history of financial services. From March 31, 2021 – March 31, 2022 (year-over-year unless otherwise noted), U.S. credit unions experienced the following trends:

Highlights (Annualized)
U.S. credit unions’ average member relationship grew by nearly $1,300 year-over-year, driven by an uptick in lending relationships and higher individual loan balances. This metric now sits at a record $23,170 ($14,105 in deposits per member and $9,064 in loans per member). By the first quarter of 2022:

  • Membership reached 132 million, rising 4 percent (compared to 3.5 percent in the year-ago period prior). More than 4.8 million consumers opened a credit union membership in the past 12 months.
  • Loans reached $1.32 trillion, rising 12 percent (compared to 4 percent in the year-ago period prior).
  • Deposits reached $1.87 trillion, rising 9 percent (compared to 23 percent in the year-ago period prior).
  • Assets reached $2.14 trillion, rising 9 percent (compared to 19 percent in the year-ago period prior).
  • Investments reached $725 billion, rising 3 percent (compared to 57 percent in the year-ago period prior).
  • Capital (retained earnings for net-worth purposes) reached $210 billion, rising 1 percent (compared to 7 percent in the year-ago period prior).

Loan Trends (Annualized)
U.S. credit union loans reached $1.32 trillion, rising 12 percent (compared to 4 percent in the year-ago period prior). By the first quarter of 2022:

  • Lending growth was picking up across the loan portfolio (2022 versus 2021): 13 percent versus 7.8 percent (first mortgages); 6 percent versus -11 percent (combined home equity loans/HELOCs); 20 percent versus 14 percent (business/commercial loans); 4 percent versus -3 percent (new autos); 13 percent versus 5 percent (used autos); 10 percent versus -9 percent (credit cards); and 12 percent versus 5 percent (total/all loans).
  • Loan growth exceeded deposit growth for the first time since 2019.
  • Loan originations started the year on another record pace.
  • Credit unions’ aggregate/combined loan portfolio is growing at the fastest annual rate since 2005.
  • Consumer lending has been driving origination growth, especially in first mortgages.
  • Annal loan growth has been accelerating over the past four quarters.
  • Indirect lending is growing at the fastest annual rate since 2017.
  • Credit unions’ market share in auto lending hit its highest first-quarter level ever.
  • Loan delinquencies hit record lows as asset quality remained historically strong.
  • The loan-to-deposit ratio is slowly rising, going from 82 percent in first-quarter 2019, to 68 percent in first-quarter 2021, back up to 70 percent in first-quarter 2022.

Deposit Trends (Annualized)
U.S. credit union deposits reached $1.87 trillion, rising 9 percent (compared to 23 percent in the year-ago period prior). By the first quarter of 2022:

  • Deposit growth has slowed across all products (2022 versus 2021): 10 percent versus 33 percent (checking); 19 percent versus 44 percent (savings); 17 percent versus 28 percent (money market); -1 percent versus 3 percent (IRA/Keogh); -10 percent versus -9 percent (certificates of deposits); and 9 percent versus 23 percent (total/all deposits).
  • Deposit growth is returning to a “normal” level as 2022 begins.
  • Annual deposit growth returned to single digits for the first time in two years.
  • Certificates of deposit shrunk as liquid core deposits continued to grow.
  • Quarter-over-quarter deposit growth slowed versus the prior year, continuing the trend from 2021.

Earnings & Capital Trends (Annualized)
U.S. credit union investments reached $725 billion, rising 3 percent (compared to 57 percent in the year-ago period prior). Credit union capital (retained earnings for net-worth purposes) reached $210 billion, rising 1 percent (compared to 7 percent in the year-ago period prior). By the first quarter of 2022:

  • Revenue rose versus first-quarter 2021, driven by loan growth.
  • Loan yield and cost-of-funds continued to trend lower, but investment yields rose as credit unions reduced cash balances.
  • Net-interest margin (NIM) was steady as interest rates began to rise. The industry’s operating expense ratio (OpEx) fell due to strong asset growth.
  • Non-interest income declined versus first-quarter 2021.
  • Fee income rose.
  • Other-operating income contracted as loan sales to the secondary market slowed.
  • Return on assets (ROA) declined 18 basis points to 0.86 percent from the 2021 peak of 1.04 percent.
  • The industry’s net-worth ratio (NWR) improved slightly, but total capital was negatively impacted by unrealized investment losses.
  • It’s been the worst market for fixed income in over 40 years for credit unions (evident in unrealized securities investment losses).

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