Trends Report: Return-on-asset ratio, first mortgage loans see increases

In its September 2021 Credit Union Trends Report, based on data from July, CUNA Mutual Group reported that credit union return-on-asset ratio rose to 1.11% in the first six months of 2021 at an annualized basis, up from 0.57% in the first six months of 2020.

Additionally, credit unions originated a record $157 billion first mortgage loans in the first half of 2021, a 21% increase above the $130 billion in originations in the first half of 2020.

The report also found that:

  • credit union loan balances rose 4.7% in the year ending in June 2021, slower than the 7.1% pace reported in the year ending in 2020;
  • for the first time in over two years, credit union consumer installment credit loan balances (auto, credit card and other unsecured loans) rose at a faster pace than all credit union loans during the first seven months of 2021;
  • vehicle sales fell in July to a 14.8 million unit seasonally-adjusted annualized sales rate, which is down from 3.9% from June when 15.4 million units were sold;
  • credit union savings balances rose 1.2% in July, below the 1.5% increase in balances in July 2020 when the month ended on a payroll Friday; and
  • as of July 2021, CUNA estimates 5,218 credit unions are in operation, down 12 from June.

Looking ahead, the report stated that, if the economy stays on its current growth trajectory, the Federal Reserve may be tapering its bond-buying in November of this year and reduce it to zero in 2022. This will push up longer-term interest rates. For example, the 10-year Treasury interest rate is expected to rise to 2.5% by the end of 2022 from 1.3% today. This will push up mortgage interest rates by a similar amount over the next year.

As for short-term interest rates, the Federal Reserve is expected to raise the Fed Funds interest rate in the second half of 2022 as the unemployment rate falls to 4%.

The Credit Union Trends Report is a monthly “pulse check” on the state of the credit union marketplace, often placed in a historical context. The report includes data from two months prior and is published and distributed by Steven Rick, chief economist for CUNA Mutual Group. The Trends Report is intended to provide a review and analysis of recent credit union financial performance and operational results in the context of recent economic activity. Data and analysis are provided to establish standards against which credit unions’ own performance can be compared.

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