Credit unions are at a pivotal crossroads as 2022 begins. Year-over-year loan growth is finally speeding up as deposit growth starts declining — although outstanding deposits remain at record highs.

The industry was still operating under one of the most unusual modern-day periods in the history of financial services as of Dec. 31 of 2021. This week’s presentation on fourth-quarter 2021 credit union trends proved this point.

Callahan & Associates hosted its Fourth Quarter 2021 Trendwatch Webinar (view entire slide presentation here) on Thursday. From Dec. 31, 2020 – Dec. 31, 2021 (year-over-year unless otherwise noted), U.S. credit unions experienced the following trends:

Highlights (Annualized)
In 2021, credit unions added more than 5.4 million new members, opened more than 4.5 million checking accounts, originated over 39 million loans, put or kept 1.2 million Americans in their homes with first mortgages, and granted nearly 36.7 million consumer loans. Specifically, by the fourth quarter of 2021:

• Loans reached $1.27 trillion, rising 8 percent (compared to 4.9 percent in the year-ago period prior).
• Deposits reached $1.81 trillion, rising 13 percent (compared to 20 percent in the year-ago period prior).
• Assets reached $2.09 trillion, rising 12 percent (compared to 18 percent in the year-ago period prior).
• Investments reached $722 billion, rising 20 percent (compared to 55 percent in the year-ago period prior).
• Capital (retained earnings for net-worth purposes) reached $220 billion, rising 7 percent (compared to 10 percent in the year-ago period prior).
• Membership reached 131.1 million, rising 4 percent (compared to 3 percent in the year-ago period prior).
• The average member relationship grew by $1,265 year-over-year, driven by a surge in deposit relationships.
• Total checking accounts and member penetration both hit record highs.
  
  

Loan Trends (Annualized)
U.S. credit union loans reached $1.27 trillion, rising 8 percent (compared to 4.9 percent in the year-ago period prior). Specifically, by the fourth quarter of 2021:

• Consumer lending led origination growth in 2021 during another record year of credit union lending.
• However, consumer loan originations slowed.
• Loan growth accelerated during the year as originations outpaced early paydowns.
• Loan portfolios expanded at a faster rate in larger credit unions versus smaller credit unions.
• Credit cards and first mortgages led the pack.
• The number of mortgage originations is down slightly from the peak in 2020 but remains well above the historical average.
• Average first-mortgage origination balances climbed as asset prices (real estate) skyrocketed.
• Credit unions were holding more long-term mortgages rather than selling them.
• Indirect lending activity was on the rise again, as well as secondary-market loan participations.
• Credit unions’ lending market share in the financial services arena remained pretty flat through the COVID-19 pandemic (which actually may be a success).
• Delinquency ticked up in the fourth quarter, but asset quality remained strong.
• As federal government stimulus programs ended in 2021, delinquencies started rising (especially in consumer lending).
• Credit unions remain well-reserved going into 2022 for potential loan losses.
  
  

Deposit Trends (Annualized)
U.S. credit union deposits reached $1.81 trillion, rising 13 percent (compared to 20 percent in the year-ago period prior). Specifically, by the fourth quarter of 2021:

• Deposits in savings, checking, and money market accounts continued to grow annually while certificates-of-deposit accounts dwindled.
• Reduced federal government relief made a clear impact in recent quarters, but members were still making deposits.
• Deposit growth continued at above-average rates, but this trend has begun to slow from pandemic highs.
• Money market accounts gained popularity in recent months as members balanced liquidity and dividend yields.
• The loan-to-deposit ratio (“loan to share”) crossed back above 70 percent for the first time in 2021 since dropping below this threshold during the economic crisis point of the COVID-19 pandemic in 2020.
  
  

Earnings & Capital Trends (Annualized)
U.S. credit union capital (retained earnings for net-worth purposes) reached $220 billion, rising 7 percent (compared to 10 percent in the year-ago period prior). Specifically, by the fourth quarter of 2021:

• Revenue declined slightly between the third and fourth quarters, but consumer lending drove growth in loan income.
• Yields remained flat, with a modest uptick in yield on investments.
• Credit unions have been spending more on operations to deliver a better member experience.
• Fee income per member rose in 2021, but it remains below pre-pandemic levels.
• Given strong asset quality, credit unions were contributing little to their loan-loss allowance accounts.
• Lower fourth quarter income brought year-to-date returns down slightly, but earnings remained near record highs.
• The industry’s net worth ratio remains above 10 percent.
  
  

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