ONTARIO, Calif.–Driven primarily by surging first mortgages, new data reveal year-over-year loan and deposit trends for California and Nevada credit unions at the end of third-quarter 2020 were nearly identical to the prior quarter.
In addition to residential mortgages, loans to businesses (mostly commercial mortgages), and member deposits showed increased, according to the California and Nevada Credit Union Leagues.
The leagues reported that as of Sept. 30, in California membership, total loans and deposits had reached record-high levels vs. the same date one year earlier, with 12.8 million members, $147 billion in loans, and $209 billion in deposits, respectively.
In Nevada, CU total loans and total deposits also reached record highs as of Sept. 30, 2020 when compared to one year earlier, the leagues said, at $3.4 billion in loans and $5.5 billion in deposits, respectively, while overall membership reached a level not seen since 2009 — 373,000 members.
According to the leagues’ analysis, membership in California, where 290 CUs are headquartered, was already “hitting new records” coming into mid-2020, while in Nevada, where 15 CUs are headquartered, membership rose significantly but remains below the previous historical record from 2008.
As CUToday.info has reported, membership growth has slowed significantly at credit unions across the country during the pandemic, with the exception being credit unions of $1 billion or more in assets. CUNA data show credit unions below that asset threshold have actually lost members. The California/Nevada leagues’ data did not break out performance by asset size.
Other Drivers
According to the leagues, the third quarter of 2020 revealed that:
- This trend, driven by “new” consumers choosing credit unions to be their financial services provider and existing members becoming new members of other credit unions, did not stop, the leagues said.
- Homeowners and vehicle owners looking to refinance their loans as interest rates “remain in historically record-low territory aided the inflow of some consumers becoming new members, as well as emergency loans offered throughout the COVID-19 pandemic.”
- Small business owners “scrambling for Paycheck Protection Program (PPP) forgivable loans issued by the U.S. Small Business Administration and the Treasury Department also played a role in new membership, although not quite as much as the prior quarter (second quarter) since by the third quarter much of these funds allocated by Congress were already depleted,” the leagues stated.
A Kickstart
The leagues further noted total credit union lending in the two states, “having already reached record territory for several quarters on end — was starting to taper off in early 2020. But it got a kickstart in springtime due to COVID-19’s effect on lower interest rates (stimulating mortgage demand) and a surge in federal emergency lending to businesses (congressional PPP loan-grants).”
The leagues reported the third quarter of 2020 showed that:
- First mortgages of all types (fixed rate, adjustable, etc.) were the main sub-drivers of the much larger total/headline loan growth as mortgage rates continued their descent even lower and homeowners refinanced into new mortgages with lower monthly interest expense. “The positive impact of this one category cannot be overstated,” the leagues stated.
- Business loan growth (including landlord real estate loans) in many regions helped as PPP lending was facilitated to local business owners seeking payroll/employee cost relief, although not at the same pace as the prior quarter (second quarter).
- The “fact that used auto loan growth did not decline as much as other loan categories (depending on the region), or in some cases experienced zero percent change, also helped bolster and buffer total/headline lending trends,” the leagues’ analysis stated. “Used vehicle prices relative to new autos, combined with very low interest rates, are making pre-owned cars and trucks relatively much more attractive to some buyers during the economic slowdown.”
- Three loan categories declined significantly as local/state government pandemic shutdowns and/or restrictions halted economic activity: home equity/HELOC, credit card, and new automobile lending.
Deposit Trends
According to the leagues, total credit union deposits in California and Nevada were already hitting record highs for many consecutive quarters going into mid-2020 due to new members joining credit unions and existing members increasing their savings.
The leagues said the third quarter data demonstrate:
- Checking and savings accounts mostly saw the highest growth rates. In many cases the regional percentage increase was between 20% and 30%, with some areas hitting 40%. “The impact deposits are having on declining loan-to-deposit ratios for all regions (loan-to-share) is significant, making the industry more liquid than before the pandemic,” the league said.
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“This increase in consumer deposits came from less spending and more savings by many existing members and even new members, as well as federal monies received by workers who were suddenly unemployed and qualified for extended/continued unemployment insurance payments and additional emergency pandemic unemployment insurance payments,” the leagues stated. “Additionally, many congressional stimulus funds deposited in the prior quarter (second quarter) were not completely spent as of late September 2020.”