Credit Union Newsletter #37

• Credit Unions Grabbing Big Slice of HELOC Market, New Analysis Shows

Credit unions boosted second liens by more than $25 billion in the first quarter of 2024 vs. the same period in 2023, a new analysis shows.

“Credit unions have become a go-to source of financing for homeowners looking to pull equity out of their properties,” stated Morningstar in its analysis of data compiled by BofA Global.

The data show second-lien mortgages at credit unions in the U.S. increased by $26 billion in the first quarter of 2024 compared to a year before, while banks ramped up their second-lien holdings by only $5 billion over the same stretch, according to BofA Global.?

“Home-equity lines of credit, or HELOCs, and second liens represent a small but growing source of funding for homeowners reeling from higher borrowing costs since 2022, when the Federal Reserve began to aggressively hike interest rates,” stated MorningStar.

• Commercial Real Estate Slows at Credit Unions?

Credit unions continued to increase their commercial real estate portfolios at a faster pace than banks and others in the first quarter.

A comparison of data from the NCUA and a report released Tuesday by the Mortgage Bankers Association (MBA) showed credit unions have been increasing their commercial real estate balances from quarter to quarter twice as fast for at least the past year as the banks and investors tracked by the MBA.

Credit union balances are also growing at least twice as fast for multi-family loans and twice as fast for the remainder of commercial real estate.

• Velera-Managed Debit Cards Surge in May

Debit card spending in May handled by the nation's largest payments CUSO grew at a pace double that of inflation and overall U.S. retail spending, while credit card spending was barely changed from a year earlier.

The Velera Payments Index released Monday showed spending rose a scant 0.1% by credit while rising 6.4% by debit.

The U.S. Bureau of Labor Statistics (BLS) reported Tuesday that retail spending, excluding automobiles and parts, rose 3.1% in May from a year earlier. The U.S. Bureau of Labor Statistics reported June 12 that inflation grew at a 12-month pace of 3.3% in May.

• Merger Expands FOM & Creates New Billion-Dollar CU

Justice Federal Credit Union ($999.5 million in assets, 63,732 members) announced it has merged with Law Enforcement & Technology Federal Credit Union ($52 million in assets, 4,492 members) in Miami. The merger, according to officials, will give LE&T FCU members access to more products and services.

Justice Federal exclusively serves the justice, law enforcement and public safety community and now, with the LE&T FCU merger, the credit union will be able to serve that community in southern Florida.?

• CU Acquisitions of Banks Hurting Small Communities, Mississippi Bankers Association CEO Says in Op-Ed

The president of the Mississippi Bankers Association has authored an op-ed that has appeared in multiple news publications in the state that argues that not only do credit unions not pay taxes, but they are also using the tax savings to buy banks and hurting local communities in the process.

MBA President and FCEO Gordon Fellows touches on numerous themes that will be familiar to credit unions in his opinion piece, telling readers that while they may be “unaware of the significant policy dispute that exists between banks and credit unions…fairness is at the heart of the dispute.

• Thrivent federal credit union to Merge Into Thrivent Bank

The FDIC last week approved deposit insurance for Thrivent Bank and the merger of Thrivent Federal Credit Union into the newly chartered industrial bank that is based in Salt Lake City.

When announcing its credit union charter in December 2012, Thrivent FCU began life as a credit union again, an identity it has not held since Thrivent Financial Bank was formed out of two credit unions in 2001. Thrivent Financial FCU's sponsor was Thrivent Financial for Lutherans (TFL) in Minneapolis, a faith-based financial services firm that primarily offers insurance and investment products, which manages more than $113 billion in assets with a net income of $513 million, according to TFL's audited Dec. 31, 2023, financial statements.

• SECU Foundation Supports Rural Housing at 0% Interest

North Carolina's State Employees' Credit Union, the nation's second largest financial cooperative, doesn't do commercial lending, but commercial real estate loans are a key activity at its foundation.

The thing is, the SECU Foundation doesn't make any money at it.

A good example is its announcement Tuesday of the opening of a new 24-unit housing complex for public school and local government employees in Windsor, N.C., the seat of rural Bertie County in the state's northeast corner.

The SECU Foundation lent $3.1 million for construction, which started in May 2023, which converted to permanent financing on June 1 after completion. The interest rate on the 15-year loan was a bargain 0%, which at the current market rate of 6.75% meant the Foundation left $1.8 million in interest on the table.

• ?Credit unions better serve consumers living paycheck to paycheck, combat financial deserts.

?Credit unions consistently serve a higher share of households living from paycheck to paycheck than banks, America's Credit Unions Head of Emerging Issues and Deputy Chief Economist Curt Long explains in the latest Economic Update video.

The Federal Reserve’s Consumer Finance Survey shows just under 40% of households that use credit unions as their primary financial institution have liquid financial assets of less than two weeks of income, more than banks (at around 35%).

“This result clearly shows credit unions are at the front lines serving households living in the margins,” Long said.

Sources – CU Times, CU Info, CU Insights