Credit Union Lending Trends to Watch for 2022
As new and used car lending continues to struggle, the outlook for commercial lending is gaining traction for Credit Unions.
2021 Was Unquestionably a Challenge for Credit Unions
While 2021 was a record year for loan production, the extended low interest-rate environment affected earnings, with margin contraction adding further pressure. Net growth lagged, partially due to refinancing and payoffs creating a never-ending grind for organizations.
But there are reasons for optimism as the commercial lending sector emerging as a strong front runner for improving balance sheets in today’s evolving economic environment.
In 2021, Consumer Lending Continued its Climb
The total loan originations at U.S. credit unions reached almost $595 billion through the nine months ending Sept. 30, 2021, surpassing 2020’s record-breaking pace.
First mortgage and used auto were responsible for the most significant quarterly increases in late 2021 — up 3.1% and 3.5%, respectively. Additionally, non-first mortgage real estate loan balances were up 1.2%, and new auto lending expanded by 0.3% despite the ongoing supply chain issues. Rounding out the data, credit card balances grew for the second consecutive quarter, increasing 2.3% from June 30 to Sept. 30.
At $293.4 billion, consumer lending comprised the largest share of year-to-date origination, growing 23.6% year-over-year and making up nearly half of all loan originations through the third quarter.
As Government relief programs fully wind down and interest rates begin to rise, lenders can expect to continue to watch the dramatic shift from refinancing to purchase mortgages – a market strongly populated with younger borrowers.
Nimble Credit Unions Experience a Tailwind as Commercial Lending Reaches a New Milestone
Commercial lending took center stage in 2021 with the biggest jump in originations.
Commercial loan originations hit an all-time high for the credit union industry.
At $33.6 billion through Sept. 30, 2021, commercial loan generation was up 37.9% over 2020, creating the most successful quarter of loan generation for credit unions on record. Normally an area dominated by traditional banks, credit unions with the ability to pivot enjoyed the positive portfolio expansion.
While improvements overall are still modest, growth has continually been positive. Liquidity has experienced nearly two years of deposit build-up and is well-positioned to take on strategic portfolio risk.
Savvy Credit Unions are poised to take advantage of this burgeoning momentum to push into new markets.
Agile lenders that can position themselves can find robust opportunities by providing support to communities through expanded commercial lending production as the nation pushes through the final blows of the pandemic, supply chain shortages abate, and business owners find a new stride.
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