PenFed expects loan demand to decline in second half of 2022
PenFed Credit Union entered 2022 expecting slower loan growth, and that was just for the second quarter.
Its combined mortgage and consumer loan originations were $7.5 billion in the second quarter, up 1.4% from a year earlier and down 30% from the first. trimester. These numbers more than doubled between the second quarter of 2020 and the second quarter of 2021.
Now Chairman and Chief Executive James Schenck has said he expects output to fall in the second half as the Federal Reserve continues to raise interest rates.
“Our business priorities for the second half of 2022 are to continue to build capital, deposits and liquidity while maintaining credit quality and delivering world-class service to members,” Schenck said. “Our teammates are fully engaged and working together with all divisions to execute on our strategic plan.”
PenFed is based in Tysons, Virginia, just outside of Washington, DC, but its 2.8 million members are scattered across the country. It was the third-largest credit union in the nation based on its assets of $35.4 billion as of March 31, and it will likely retain that rank with the $36.6 billion in assets it had. to June 30.
It has grown rapidly over the past two years, setting all-time records for creations. Mortgages doubled last year. Its strategy has been to sell off many of its loans, while building up its production force.
Results from a July 14 PenFed press release showed production hit a wall in the second quarter.
“Even with slowing market demand, PenFed’s mortgage division still managed to generate $3.4 billion in the second quarter,” he said. Residential mortgage originations (first and second liens) in the second quarter fell 20% from a year earlier and 47% from the prior quarter, using NCUA data for comparison. For the first half – boosted by a strong first quarter – residential issuance was $9.8 billion, up 35% from the first half of 2021.
Consumer loan production, which includes auto loans, credit cards, personal loans and refinanced student loans, was $4.1 billion in the second quarter, up 31% from to the previous year and down 4.7% compared to the previous quarter. Total consumer loans were $8.4 billion in the first half of the year, up 78% from the first half of 2021.
Revenues have held up. PenFed generated $93 million in net income in the second quarter, or 1.03% annualized of its average assets. That was down from 1.10% a year earlier, but up from 0.90% in the first quarter. Like many credit unions, PenFed’s first-quarter earnings fell due to both lower loan sales and sharp declines in the value of investments that caused unrealized losses.
PenFed’s total loan balance was about $30.3 billion as of June 30, up 45% from a year earlier and 28% from the first quarter.
PenFed member shares were $26.2 billion as of June 30, up 28% from a year earlier and 14% from the first quarter.
PenFed had 2.8 million members as of June 30, up 20% from a year earlier and 3.1% from the prior quarter. PenFed said the gain included more than 130,000 net new members in the second quarter alone.
“Helping our 2.8 million members become more financially successful is how we measure success,” Schenck said. “Adding an average of 47,800 new members per month in the first six months of this year is a result of PenFed’s value proposition of great-value rates and dedication to serving members over 4 000 finance professionals who drive PenFed forward.”
“In a world where members have 10,000 more choices of where to conduct their financial business, PenFed’s membership growth is truly remarkable,” he said. “I am extremely proud of the entire PenFed team and their performance in an extremely volatile economic environment.”