Loans contract at credit unions for first time in 13 years

US credit unions' total loans and leases fell for the first time in 13 years during the first quarter.

The credit union industry held $1.616 trillion in total loans and leases as of March 31, down $1.90 billion, or 0.1%, relative to Dec. 31, 2023, according to regulatory data from S&P Global Market Intelligence. The decline marks the first time the industry's loans have contracted since the first quarter of 2011.

Consumer lending contracts

Much of the decline came from auto lending as new vehicle loans fell 2.5% sequentially and used car loans declined 0.6%. The decreases mark the second consecutive sequential drop, a sharp contrast from prior to the fourth quarter of 2023 when used vehicle loans rose for 50 consecutive quarters.

Credit unions also cut back on unsecured lending. Credit card loans declined 1.5%, while other unsecured loans went down 0.9%.

Conversely, loan categories with positive growth included one- to four-family, both first-lien and junior-lien, as well as member business.

Loan and deposit trends

Half of the 20 largest credit unions bucked the overall industry trend. Jacksonville, Fla.-based VyStar CU topped the list with quarter-over-quarter loan growth of 4.5%, though some of that came from its acquisition of Jacksonville, Fla.-based 121 Financial CU, which was completed March 1.

On the other hand, North Liberty, Iowa-based GreenState CU reported the highest percentage decrease in total loans and leases at 6.6%, or $640.0 million. Most of the decline was from vehicle loans, with the used category down $367.6 million and the new category down $169.1 million.

Credit unions' liquidity levels benefitted from the lending pullback. As of March 31, liquid assets for the industry totaled $320.43 billion, up 22.5% from the end of 2023. Liquid assets comprised 23.3% of total assets, reaching its highest point in the last seven quarters.

On the other side of the balance sheet, the industry grew shares and deposits for the second quarter in a row. The 2.8% sequential growth represented the fastest pace in the last two years.

Only three of the 20 largest credit unions reported fewer shares and deposits in the first quarter: San Diego-based San Diego County CU, GreenState and Global CU. San Diego County CU also had the lowest ratio of loans and leases to shares and deposits at 73.15%.

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Credit quality trends

Credit quality was mixed in the first quarter. Net charge-offs (NCOs) as a percentage of average loans rose for the 10th consecutive quarter to 0.80%. But delinquent loans to total loans fell 8 basis points, reversing a three-quarter trend.

The nation's largest credit union by total assets, Vienna, Va.-based Navy FCU, reported the highest NCO ratio among the top 20 institutions at 2.61%. Tysons, Va.-based Pentagon FCU, which had the highest ratio for the fourth quarter of 2023, saw the most dramatic quarterly decrease at 119 basis points.

However, Pentagon FCU's delinquency ratio jumped 65 basis points, which was a bigger move than any credit union in the top 20 group except for GreenState, which had a 70-basis-point increase. Raleigh, NC-based State Employees CU had the highest ratio of delinquencies at 2.07%, down 18 basis points quarter over quarter.