10 THE NAFCU JOURNAL NOVEMBER–DECEMBER 2022 LENDING TO MAIN STREET By Curt Long, NAFCU Chief Economist and Vice President of Research THE BOTTOM LINE Bank lobbyists are notorious for their misinformation. In their eyes, credit unions are just like banks, only without the federal income tax burden. They often suggest that credit unions offer the same services, operate with the same motives, and in every meaningful way are simply “for-profits in disguise.” Unfortunately for these bank lobbyists, the data tells a different story. Because when it comes to serving everyday Americans and small businesses, there simply is no comparison: credit unions are the ones meeting the needs of Main Street. As compared to banks, credit unions devote a much larger share of their balance sheet toward “Main Street” loans— consumer loans, residential mortgage loans and small business loans.1 At year-end 2021, these loans constituted 57% of credit union assets compared to just 22% for banks. Not only is the bank figure markedly lower, it is trending downward. Ten years ago, 31% of bank balance sheets were dedicated to Main Street lending. Segmenting those results by asset size yields further insight. For each asset class, credit unions are more highly concentrated in Main Street loans than banks. However, the disparity grows with size. Where bank concentration in Main Street lending tends to recede with growth, the opposite is true for credit unions. This outcome speaks volumes about the credit union difference. Once achieving scale, banks tend to steer the balance sheet toward more lucrative areas. But credit unions with more resources provide greater benefits to their member-owners. Not only do credit unions make more Main Street loans, but they also lend to borrowers and communities ignored by banks. Credit unions have made tremendous efforts in recent years to extend the benefits of credit union membership to areas where banks are withdrawing. Data from the Home Mortgage Disclosure Act illustrates this best and shows that, despite operating within the confines of field of membership restrictions and regulatory obstacles, credit unions are eager to reach disadvantaged communities. The list of cross-sections that credit unions are expanding into is long and varied. Since 2011, credit unions have increased their share of loans to Black, Hispanic, Female, and Low-to-Moderate Income (LMI) borrowers.2 In terms of geographies, they have also increased lending to Minority neighborhoods3 and LMI census tracts.4 These trends are markedly different from those of banks, which have sharply cut their lending share to LMI borrowers over the past decade, and which have raised their share of loans in the remaining categories by a more modest amount. As a result, credit unions rank ahead of banks in all six categories. That was true of only one category (LMI census tracts) in 2011. Banks include mutual savings institutions. Data as of June 30, 2022. See Footnote for Main Street Loan calculation. Sources: NCUA, FDIC, NAFCU calculations Main Street Loans as Share of Total Assets, by Institution Type and Asset Class 80% 60% 40% 20% 0% Banks Credit Unions $10B+ $1B-10B $100M-1B <$100M
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