PPP Loan Data by Lender Type

The following table has information on the number of Paycheck Protection Program (PPP) loans, dollar amount of loans, and jobs by lender type as of the end of June 2020.

Survey: Compliance Worries Rise in 2019

U.S. banks and credit unions are reporting increased anxiety levels over compliance obligations, according to a survey released on December 4, 2019 by Wolters Kluwer.

This year’s regulatory and risk management indicator score was 95, up 10 points from 2018.

Specific points of high concern contributing to the overall indicator score were the effects of new Home Mortgage Disclosure Act rules, overall risk management concerns, and ongoing challenges from compliance change management.

The report cited that nearly eight in 10 respondents will continue to prioritize cybersecurity risk over the next year. Other areas being prioritize over the next 12 months were credit risk, compliance risk, third-party risk and operational risk, which all saw double-digit percentage increases.

Among top obstacles in implementing effective compliance programs, 47 percent of respondents stated manual compliance processes and 45 percent cited inadequate staffing.

The survey was conducted nationwide between August 7 and September 3, 2019 and generated 704 responses.

Read the press release.

Moebs Study: Banks Paying Higher Deposit Rates Than CUs

A study by Moebs Services found that banks are paying higher deposit rates than credit unions.

The study found that for the first time since 2007 total interest expense divided by assets at credit unions is less than banks. So far this year, banks are 90 basis points (BPs), while CUs are 83 BPs or 7.8 percent less.

However, the study found that credit unions with greater than $10 billion in assets are paying 116 BPs, while similarly-sized banks are paying 91 BPs.

In contrast, community banks are paying 66 BPs compared to only 43 BPs by credit unions.

Chart of the Day: PFI of Retail Consumers and Small Businesses

The following chart from Raddon Research shows the primary financial institution (PFI) of retail consumers and small businesses.

Think Again, Banks Beat CUs on Deposit Rates

The Credit Union Journal is reporting that analysis of industry data shows that credit unions do not pay the best rates on deposits.

According to an analysis by The Kafafian Group, the median cost of interest bearing liabilities at banks with between $1 billion and $10 billion in assets were 1.25 percent versus 95 basis points for comparable sized credit unions.

In addition, another analysis of deposit rates in 15 metropolitan areas found that banks are paying more than credit unions for deposits.

These findings contradict the assumption that credit unions offer better deposit rates than other financial institutions.

The article provides some explanations for this, including regulatory changes making core deposits more attractive at the largest of banks.

Read the article (subscription may be required).

Auto Finance by Lender Type

The following chart looks at auto lending by lender type.

The chart includes information on outstanding auto loans and the share of auto loans that are subprime by lender type. The chart appeared in the Federal Reserve Bank of New York's Liberty Street Economics.

Banks followed by credit unions had the largest amount of outstanding auto loans. Credit unions had the lowest share of subprime loans.

To read more of the Liberty Street Economics piece, click here.

Does Primary Financial Institution Impact Consumers' Choice of Mortgage Providers?

Raddon Research Insights found that consumers, who identify a credit union as their primary financial institution, are more likely to go to their credit union for a mortgage than individuals identifying other financial institutions as their primary financial institutions.

Eighty-three percent of credit union members, who identify their credit union as their primary financial institution, plan to use their credit union for a mortgage.

Only 32 percent of customers who state a major bank is their primary financial institution would use this major bank for a mortgage.

The percentage of regional bank and community bank customers were under 25 percent.

Checking Accounts Grow at Faster Pace at CUs Than Other Financial Institutions

Credit unions are gaining checking account market share, according to Moebs Services Checking Account Barometer Study.

The study found that checking accounts at credit unions increased by 4.3 percent for the year ending September 2018. Over the same time period, checking accounts at banks and thrifts grew by 1.7 percent and 1.5 percent, respectively.

At the end of September 2018, credit unions had 16 percent market share of the 359 million checking accounts. Banks had a 75 percent market share, while thrift had 9 percent of the market.

According to Moebs Services, credit unions are leading the way with bringing new consumer checking accounts on board.

Overdraft Revenues Up at CUs, Down at Banks and Thrifts

Overdraft revenues increased at credit unions; but fell at banks and thrifts, according to Moebs Overdraft Revenue Study.

The study found that year-over-year overdraft revenues increased by almost $500 million at credit unions as of September 30, 2018. However, overdraft revenues declined by a combined $400 million at banks and thrifts.

Credit unions saw an increase in the volume of overdraft transactions by 2.3 percent over the year ending on September 30. On the other hand, overdraft transactions dropped by 7.3 percent and 2.2 percent at banks and thrifts over the same period, respectively.

ACSI: Banks and Credit Unions Tie in Customer Satisfaction

Banks match credit unions in consumer satisfaction.

According to the American Customer Satisfaction Index (ACSI®), banks and credit unions both scored an 81. Regional and community banks had a score of 84.

Credit unions saw a dip in customer satisfaction of 1.2 percent year over year, while banks were unchanged.

ACSI found that credit unions offered better in-person customer service than banks, but not by much. Credit unions scored an 89, while banks scored 88.

Credit unions also led banks in speed of service at branches (88 to 85) and call center satisfaction (84 to 81).

However, banking mobile apps were superior in quality (86 to 85) and more reliable (85 to 83).

Read the press release.

Banks: Credit Unions Are the Chief Nonbank Competitor for Small Business Loans

A survey on Small Business Lending by the Federal Deposit Corporation found that credit unions were the primary nonbank competitor to banks for small business loans.

According to survey responses, both small and large banks (52.3 and 55.0 percent) reported frequent competition with credit unions with regard to small business lending.

The report defined banks with less than $10 billion in assets as small, and banks with at least $10 billion in assets as large.

According to the report, small banks were more concerned than large banks about credit union competition.

Nearly one-third (34.1 percent) of small banks viewed credit unions as a top three competitor, compared with only 12.2 percent of large banks.

Among small banks, those with less than $250 million in assets were about twice as likely as those with $1 billion to $10 billion in assets to view credit unions as a top three competitor (39.0 percent compared with 19.1 percent).

Only 4.5 percent of small banks stated that a credit union was their number one competitor with respect to small business loans.

For banks that identify credit unions as their number one competitor, the top perceived advantages of credit unions dealt with pricing (85.1 percent) and, to a lesser extent, other elements of loan structure. The report noted that the credit union pricing advantage arises from their preferential tax status.

Read the report.

Commercial Bank and Credit Union Failures

A paper by Luis G. Dopico and James A. Wilcox examines the failures of credit union and commercial bank failures.

Between 1980 and 2016, more credit unions failed than commercial banks -- 2,165 versus 1,904. But the paper noted that credit unions had a slightly lower annual failure rates than commercial banks, averaging 0.44 percent for credit unions versus 0.48 percent for commercial banks over the same time period.

However, going back to 1971, the annual failure rate for credit unions was higher than the failure rate for commercial banks.

The study found that the rate of bank and credit union failures varied over time between 1980 and 2016. During the time periods of 1980 and 1986, 1994 - 2007, and 2014 - 2016, credit unions had a higher failure rates than commercial banks. But during 1987 - 1993 and 2008 - 2013, bank failure rates exceeded credit union failure rates.

The paper noted that the National Credit Union Share Insurance Fund had a lower loss rate per insured deposits than the Federal Deposit Insurance Corporation.

The paper stated that many of the reasons associated with the failure of commercial banks were also present with the failure of credit unions. Both credit unions and commercial banks that failed had more commercial mortgages, fewer assets, more delinquent loans, higher noninterest expenses, less capital, and lower return on assets (ROAs).

The authors also found the following differences in bank and credit union failures. "Having more residential mortgages signaled more failures of credit unions, but not of banks. Conversely, having more commercial and industrial (C&I) loans and higher local unemployment rates signaled more failures of banks, but not of credit unions."

The paper further pointed out that many credit union failures are not related to historical financial conditions; but rather due to largely idiosyncratic reasons, such as sponsor failures, poor record keeping, etc.

Read the paper.

Nine Percent of Small Businesses Applied for Credit at CUs

According to the Federal Reserve's 2017 Small Business Credit Survey, banks are the most common source that small businesses apply to for credit.

Only 9 percent of small businesses reported applying for credit at credit unions.

Ten percent of medium to high credit risk firms applied for credit from credit unions versus 8 percent of firms with low credit risk.

Credit unions had the lowest approval rate of loan/line of credit and cash advances at 53 percent. The approval rate at credit unions was 76 percent for low credit risk firms versus 26 percent for medium to high credit risk businesses.

The survey found that community development financial institutions, credit unions, and small banks had the highest net satisfaction rate from small business borrowers. Community development financial institutions rated the highest at 76 percent. Small banks and credit unions had net satisfaction ratings of 73 and 74 percent, respectively.

Percentage of small business nonapplicants with debt from credit unions was 8 percent. However, nonapplicants with debt gave credit unions the highest net satisfaction ranking at 81 percent.

The survey noted that applications to online lenders increased to 24 percent in 2017 from 21 percent in 2016.

View the survey report.

CFPB Flags Risk Associated by Longer Maturity Car Loans

A study by the Consumer Financial Protection Bureau (CFPB) flags the higher risk posed by longer term auto loans.

The study noted that auto loans with longer maturities continue to expand market share, despite a cooling in the auto finance market. According to the CFPB, loans with maturities of six years or longer accounted for 42 percent of the market in 2017 year-to-date, up from 26 percent in 2009.

Six-year auto loans are the most common term used to finance auto loans.

Longer-maturity loans may pose greater risks to consumers. These loans are more likely to be used for larger loan amounts and by borrowers with lower credit scores. The average credit score for a borrower for taking out a six-year auto loans was 674 -- 39 points below the credit score for borrowers taking out a five-year auto loans. And given that the average length of U.S. car ownership is 6.5 years, longer loan maturities may mean borrowers are paying off loans for cars they no longer drive.

The dividing line in loan quality between five-year loans and six-year loans was especially stark, with default rates for the latter roughly double the former at comparable points since origination. For example, a six-year car loan made in 2014 had a cumulative default rate of over 5 percent two years after origination, but a similar five-year loan saw a default rate of just over 2.5 percent.

Read the report.

Consultant: Service Charges Are Vital for CUs

Research by Michael Moebs, Economist & CEO of Moebs $ervices, found that credit unions are more reliant on service charges than other depository institutions.

According to Moebs, service charges on deposit accounts include transaction fees - money orders, check cashing, etc., maintenance fees, ATM fees, overdraft fees, and other overdraft related items.

According to Moebs' analysis, service charges as a percent of assets were 0.59 percent for credit union in 2017 versus 0.22 percent for banks and 0.09 percent for thrifts.

Moreover, Moebs found that service charges at credit unions represented 83.6 percent of total net income. In comparison, service charges as a percent of net income for banks and thrifts were significantly lower at 21.4 percent and 8.1 percent, respectively.

Michael Moebs said: "Strategies such as price and account design are essential to credit unions in determining what will generate the most service charge revenue, while staying consumer friendly."

Study: CUs and Community Banks Face Serious Demographic Challenge

The Financial Brand recently commented that credit unions and community banks face the threat of generational obsolescence.

TA study by FIS examined the age composition of bank and credit union customers.

According to the study, approximately 32 percent of credit union members are millennials -- almost the same as regional banks (34 percent). In comparison, 18 percent of bank customers are millennials. On the other hand, the 50 largest banks have a millennial penetration rate of 42 percent.

While credit unions have roughly the same penetration rate as regional banks, credit unions are losing ground to the largest banks, as large and regional banks scoop up a disproportionately larger share of the millennial generation.

In addition, the FIS study found that community banks and credit unions tend to serve an older population base. Approximately 57 percent of community bank customers and 46 percent of credit union members are over the age of 52.

Read the story.

How Underwater Are Medallion Loan Portfolios?

Medallion Financial's Form 10-Q filed with the Securities and Exchange Commission discloses how underwater its medallion loans are.

According to its 10-Q,

"Decreases in the value of our medallion loan collateral have resulted in an increase in the loan-to-value ratios of our medallion loans. We estimate that the weighted average loan-to-value ratio of our managed medallion loans was approximately 124% as of March 31, 2017 and 129% as of December 31, 2016."

While information on the geographic mix of taxi medallion loans, down payments, and loan structures are not known, this loan-to-value statistic provides a good approximation of how underwater are the medallion loan portfolios at taxi medallion lending credit unions.

Consumer Credit at CUs Grew at a Faster Pace in March

The Federal Reserve reported that outstanding consumer credit at credit unions grew in March.

Outstanding consumer credit increased by $4.2 billion in March to $393.7 billion. In comparison, consumer credit grew by $3.3 billion in February.

The expansion in consumer credit at credit unions was driven by an expansion in non-revolving credit, as revolving credit fell in March.

Non-revolving credit increased by almost $4.3 billion in March to $341.6 billion. Revolving credit slipped from approximately $52.3 billion in February to almost $52.1 billion in March.

Read the G. 19 release.

Median CU Overdraft Fees Almost Doubled Since 2000

The median overdraft fee at a credit union has almost doubled since 2000.

According to research from Moebs $ervices, the median overdraft fee at credit unions is $29, up from $15 in 2000.

In comparison, the median overdraft fee at banks rose by 50 percent over the same period from $20 to $30.

When the overdraft fee is controlled for inflation, Moebs $ervices found that only 8 percent of the credit unions charged an overdraft fee that is less than or equal to the inflation-adjusted overdraft fee. The inflation-adjusted overdraft fee for credit unions would equal $20.86 per item.

Michael Moebs stated: "Credit unions have an image of being more consumer friendly. When taking a look at the history of overdraft prices, credit unions have been increasing their price at a much quicker rate and now almost on par with banks."

Read the MarketWatch article.

Consumer Credit at CUs Grew by $4.2 Billion in January 2017

The Federal Reserve reported today that outstanding consumer credit at credit unions grew by $4.2 billion to $386.2 billion for the month of January 2017, according to the G.19 Report.

Revolving credit fell from $53.1 billion in December 2016 to $52.5 billion in January 2017.

Non-revolving credit at credit unions grew by $4.8 billion in January to $333.7 billion.