ALEXANDRIA, Va. — Federally insured credit unions parlayed an improving economy in the second quarter of 2014 to the highest year-over-year loan growth since 2006, according to new analysis released Tuesday by the National Credit Union Administration.
Overall, lending increased in all categories, NCUA reported. Outstanding loan balances rose almost 10% from the second quarter of 2013 to $673.9 billion. NCUA said this was the highest year-over-year growth rate since the first quarter of 2006.
CUs with assets of less than $10 million recorded higher net worth ratios, but lagged in net worth growth, loan growth, membership gains and return on average assets.
Federally insured CUs with more than $500 million in assets led in most performance measures, NCUA noted. These 448 credit unions held $760 billion in combined assets, 69% of the system's total assets during the quarter.
They also reported faster growth and higher returns on average assets than the credit union system as a whole.
The new figures were based on call report data submitted to and compiled by NCUA for the quarter ending June 30. The industry's net long-term asset ratio remained "high," the agency said — 35.4% percent — "so interest-rate risk remains a serious threat."
"A stronger economy and a stronger credit union system go hand-in-hand," NCUA Chairman Debbie Matz said in a statement. "Credit unions continue to make the loans that help people buy cars and homes, pay college tuition and start or expand small businesses."
"However," Matz continued, "the slight decrease in long-term investments as a share of assets over the past quarter is not enough to alleviate interest-rate risk. Long-term fixed-rate assets remain elevated, and interest-rate risk continues to be a key concern and a supervisory priority for NCUA."
Dan Berger, president and CEO of the National Association of Federal Credit Unions, said the call report data "showcases the value of credit unions" to the nation's economy.
"The NCUA's second-quarter call report data confirms that credit unions are great catalysts for economic growth, providing their more than 98 million members with low-cost, high quality loans," said NAFCU's Berger.
Other year-over-year data released by NCUA include:
- New auto loans grew 17% to $77.7 billion.
- Used auto loans increased 11.6% to $135.3 billion.
- Net member business loan balances rose 12% to $48.8 billion.
- Non-federally guaranteed student loans increased 26% to $2.9 billion.
- Short-term small loan originations, a consumer-friendly alternative to predatory payday loans, totaled $106 million at an annualized rate in the first half of 2014, up 27.5% from the first half of 2013.
First mortgage real estate loans reached $279.2 billion, up 9.9% the second quarter of 2013. Sixty-one percent of first mortgage loans outstanding had fixed rates.
The growth in total loans over the year contributed to a 4.2 percentage-point increase in the overall loan-to-share ratio, which reached 71.7%, the highest ratio since the fourth quarter of 2010.
Longer Investment Share Remains Elevated
Total investments by federally insured credit unions (excluding cash on deposit and cash equivalents) remained at "essentially the same level" in Q2 2014 as in the first quarter, $291 billion. NCUA said this marked a decline of $8 billion, or 2.7%, from the second quarter of 2013.
As a share of assets, total investments declined almost 2 percentage points from Q2 2013, to 26.4%. Long-term investments (those with maturities of at least 3 years) were unchanged from the second quarter of 2013 at 11.7% of assets.
According to NCUA, though stabilizing as a share of assets, "high levels of long-term investments in the asset portfolio could pose interest-rate risk for federally insured credit unions as interest rates rise," the regulator warned.
Membership in federally insured credit unions grew by 909,452 in the second quarter of this year, reaching a new high of 98 million.
The number of federally insured CUs fell to 6,429 at the end of the second quarter, 252 fewer than at the end of the same period last year, a decline of 3.8%. "The decline is consistent with recent consolidation trends within the credit union system," NCUA assessed.
The aggregate net worth ratio for federally insured credit unions was 10.77% at the end of the second quarter, 16 basis points higher than the previous quarter and 27 basis points higher than the end of Q2 2013.
Overall, federally insured CUs remain well-capitalized, with 97% reporting a net worth at or above the statutorily required 7%, compared to 96.2% at the end of the second quarter of 2013.
Less than 1% of federally insured credit unions are below the adequately capitalized standard.
Other highlights from NCUA's Q2 report included:
- Federally insured credit unions' return on average assets ratio rose to an annualized 81 basis points through the end of the second quarter, a slight increase from Q1 and 3 basis points below the second quarter of 2013.
- Net income in the quarter ending June 30 was $2.3 billion, up 2.9% from a year earlier.
- Interest income rose $410 million from a year earlier, to $9.1 billion for the quarter.
- Non-interest income increased $303 million from the previous quarter but was $73 million lower than the second quarter of 2013.
- Expenses in Q2 2014 were up 2.6% from Q2 2013.
- Federally insured CUs' total assets grew $47.3 billion, or 4.5%, from Q2 2013, to rise above $1.1 trillion for the first time.
- Delinquency and net charge-off ratios for federally insured CUs remained "relatively steady" in the second quarter. The delinquency ratio of 0.85% was a slight increase from the previous quarter but was below the 1.04% ratio in Q2 2013.
