Insured shares and deposits in federally insured credit unions grew – for the first time – to more than $1 trillion in the third quarter of 2016, the National Credit Union Administration announced Monday.
Membership in federally insured CUs reached 106.2 million at the end of Q3, even as the number of credit unions continued to decline, according to new figures based on Call Report data submitted to and compiled by the agency for the quarter ending Sept. 30.
“By almost any measure, America’s credit unions as a whole continue to grow,” Rick Metsger, NCUA’s board chairman, said in a statement. “Rising credit union membership has boosted deposits, and loans have continued to grow at a double-digit pace. At the same time, the overall delinquency rate has held steady, and the shift away from long-term investments has continued.
“Despite these positive trends, federally insured credit unions must guard against risks on the horizon, including rising interest rates and regional economic downturns, particularly in energy-producing states,” Metsger added.
Shortly after the regulator released the data, Dan Berger, president and CEO of the National Association of Federal Credit Unions, said NAFCU applauded credit unions’ achievements in share and membership growth.
“The third-quarter data indicates that consumers continue to value credit unions’ business model of putting members first,” said Berger. “Main Street credit unions continue to attract consumers who value the difference between credit unions and Wall Street. Extraordinary member service and top-notch products and services underscore the credit union value proposition and continue to attract new members to the industry.”
Following are several highlights of NCUA’s credit union industry data release for Q3:
Loans Outstanding Up 10.1%
Total loans outstanding at federally insured credit unions reached $847.1 billion at the end of the third quarter of 2016, an increase of 10.1% from one year earlier.
Year over year, loans grew in every major category, including:
- New auto loans increased 15.8% to $112.2 billion.
- Used auto loans rose 12.3% to $178.1 billion.
- Total real estate lending grew 8.2% to $421 billion.
- Net member business loan balances increased 14% to $63.9 billion.
- Non-federally guaranteed student loans expanded 10.1% to $3.8 billion.
- Payday alternative loans originated at federal credit unions rose 9.5% to $129.5 million.
The loans-to-shares ratio was 78.6%, up from 77.5% a year earlier. The same ratio was slightly higher for low-income credit unions at 80.6%.
Investment Levels Continue General Decline
Total investments by federally insured credit unions stood at $266.3 billion at the end of the third quarter, down 1.4% from the third quarter of 2015. Short-term investments grew from the end of the third quarter of 2015, while other investments declined in that period:
- Investments with maturities of less than one year totaled $75 billion, an increase of 11.5%.
- Investments with maturities of one to three years were $100.7 billion, a decline of 4.5%.
- Investments with maturities of three to 10 years were $87 billion, a decline of 6.4%.
- Investments with maturities greater than 10 years were $3.6 billion, a decline of 19.7%.
The system’s ratio of net long-term assets to total assets was 32% at the end of the third quarter, down from 32.4% a year earlier.
Little Change in Overall Delinquency Rate; Charge-Off Rates Increase Slightly
The delinquency rate at federally insured credit unions was 77 basis points in the third quarter, down 1 basis point from a year earlier.
- The delinquency rate for fixed real estate was 53 basis points, down from 65 basis points in the third quarter of 2015.
- The delinquency rate for credit cards was 104 basis points, compared to 97 basis points a year earlier.
- The delinquency rate for non-federally guaranteed student loans was 136 basis points, unchanged from a year earlier.
- The member business loan delinquency rate was 152 basis points, compared to 111 basis points a year earlier.
The system’s net charge-off ratio increased to an annualized 53 basis points in the first three quarters of 2016, up from 46 basis points in the first three quarters of 2015.
Asset Growth and System Consolidation Continue
Total assets in federally insured credit unions reached $1.28 trillion at the end of September, an increase of 8.2% for the year ending in the third quarter.
NCUA said credit union system consolidation, primarily the result of mergers, also continued in the third quarter. The number of federally insured credit unions fell to 5,844, down 246 from a year earlier. Approximately 70% of the decline occurred in credit unions with less than $10 million in assets. In all, there were 3,648 federal credit unions and 2,196 federally insured, state-chartered credit unions at the end of the third quarter.
Low-Income Credit Unions Rising
A total of 2,459 federally insured credit unions carried a low-income designation at the end of the quarter, a 7.6% increase from a year earlier. Forty-two percent of federally insured credit unions now have the low-income designation, and nearly 36% of credit union members belong to a low-income credit union.
Credit Unions Remain Well-Capitalized
Overall, the credit union system’s aggregate net worth ratio was 10.85% as of the end of September, the same as the previous quarter. One year earlier, the system’s aggregate net worth ratio was 10.99%.
The percentage of federally insured credit unions that were well-capitalized remained steady in the second quarter, with 97.9% reporting a net worth ratio at or above the Federal Credit Union Act’s definition of well-capitalized. At the end of the third quarter of 2016, less than 1% of federally insured credit unions were less than adequately capitalized.
Net Income Grows; Aggregate ROA Ratio Slightly Lower
Federally insured credit unions reported an annualized net income of $9.7 billion in the first three quarters of 2016, up 5.7% from the $9.2 billion reported one year earlier.
The annualized return on average assets ratio for federally insured credit unions stood at 78 basis points on Sept. 30, 2016, down from 80 basis points a year earlier. The median return on average assets was 37 basis points at an annual rate during the first three quarters of 2016, up slightly from 36 basis points a year earlier.
System Growth Remains Concentrated in Larger Credit Unions
The long-term trend of large federally insured credit unions leading system growth continued in the third quarter, the regulator said.
Credit unions with assets of $500 million or more led the system in most performance measures. With $938.4 billion in combined assets, these 498 credit unions held 73.5% of total system assets. The 4,292 credit unions with $100 million or less in assets held 8.2% of total system assets.
Consistent with previous quarters – and as documented in Credit Union Journal’s ongoing coverage of the “great divide” among CUs – large credit unions reported the greatest growth in loans, membership and net worth, as well as the highest return on average assets. Credit unions with assets of less than $100 million saw smaller growth in net worth and loans, lower return on average assets, and, for credit unions with assets of less than $10 million, declining membership.
