ALEXANDRIA, VA (September 2, 2014) -- An improving economy in the second quarter of 2014 resulted in the highest year-over-year loan growth since 2006 for federally insured credit unions as lending increased in all categories, the National Credit Union Administration reported today.
“A stronger economy and a stronger credit union system go hand-in-hand,” NCUA Board Chairman Debbie Matz said. “Credit unions continue to make the loans that help people buy cars and homes, pay college tuition and start or expand small businesses. However, 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.”
The industry’s net long-term asset ratio remained high—35.4 percent—so interest-rate risk remains a serious threat.
NCUA today released the new figures based on Call Report data submitted to and compiled by the agency for the quarter ending June 30, 2014.
Outstanding Loans Up 9.8 Percent in the Past Year
In the second quarter of 2014, outstanding loan balances rose 9.8 percent from the second quarter of 2013 to $673.9 billion, the highest year-over-year growth rate since the first quarter of 2006. Year-over-year:
- New auto loans grew 17 percent to $77.7 billion.
- Used auto loans increased 11.6 percent to $135.3 billion.
- Net member business loan balances rose 12 percent to $48.8 billion.
- Non-federally guaranteed student loans increased 26 percent 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 percent from the first half of 2013.
First mortgage real estate loans reached $279.2 billion, up 9.9 percent from 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 percent, 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 the second quarter of 2014 as in the first quarter, $291 billion. This marked a decline of $8 billion, or 2.7 percent, from the second quarter of 2013. Investments with maturities of three years or less increased $3 billion from the previous quarter, but were $13 billion below the second quarter of 2013. Investments with maturities greater than three years declined slightly from the previous quarter but were $5 billion higher than at the end of the second quarter of 2013.
As a share of assets, total investments declined almost 2 percentage points from the second quarter of 2013, to 26.4 percent. Long-term investments (those with maturities of at least 3 years) were unchanged from the second quarter of 2013 at 11.7 percent of assets.
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.
Membership Passes 98 Million, Consolidation Continues
Membership in federally insured credit unions grew by 909,452 in the second quarter of 2014, reaching a new high of 98 million.
The number of federally insured credit unions fell to 6,429 at the end of the second quarter, 252 fewer than at the end of the second quarter of 2013, a decline of 3.8 percent. The decline is consistent with recent consolidation trends within the credit union system.
Return on Average Assets Up, Net Income Slightly Higher
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 the first quarter 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 percent 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 the second quarter of 2014 were up 2.6 percent from the second quarter of 2013.
Net Worth Up; Credit Unions Remain Well-Capitalized
The aggregate net worth ratio for federally insured credit unions was 10.77 percent at the end of the second quarter, 16 basis points higher than the previous quarter and 27 basis points higher than the end of the second quarter of 2013.
Overall, federally insured credit unions remain well-capitalized, with 97 percent reporting a net worth at or above the statutorily required 7 percent, compared to 96.2 percent at the end of the second quarter of 2013. Less than one percent of federally insured credit unions are below the adequately capitalized standard.
Assets Continue to Rise, Shares Up From a Year Ago
Federally insured credit unions’ total assets grew $47.3 billion, or 4.5 percent, from the second quarter of 2013, to rise above $1.1 trillion for the first time. Overall, share and deposit accounts declined slightly from the first quarter to $940.4 billion, but were 3.4 percent higher than the $909.5 billion at the end of the second quarter of 2013. Share drafts were up 6.3 percent from a year ago, and regular shares were up 7.3 percent. All other deposits were up 0.4 percent.
Delinquency and Charge-Off Ratios Steady; Bankruptcy Losses Decline
Delinquency and net charge-off ratios for federally insured credit unions remained relatively steady in the second quarter. The delinquency ratio of 0.85 percent was a slight increase from the previous quarter but was below the 1.04 percent ratio in the second quarter of 2013. The net charge-off ratio was 49 annualized basis points, down from 50 basis points in the previous quarter and down from 58 basis points a year earlier.
The percentage of loan charge-offs due to bankruptcy rose from the previous quarter to 20.6 percent, but remained below the 22.1 percent level at the end of the second quarter of 2013.
Large Credit Unions Grow as the Smallest Credit Unions Decline in Many Measures
Federally insured credit unions with more than $500 million in assets still led in most performance measures. These 448 credit unions held $760 billion in combined assets, 69 percent 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.
Credit unions 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.
A summary of credit unions’ current ratios and growth from the second quarter of 2013 to the second quarter of 2014 by asset size for selected metrics follows:
For more information about the performance of federally insured credit unions, NCUA makes the complete details of the June 2014 Call Report available online here. A summary of first-quarter performance is available here, and financial trends data for federally insured credit unions are available here.
NCUA is the independent federal agency created by the U.S. Congress to regulate, charter and supervise federal credit unions. With the backing of the full faith and credit of the U.S. Government, NCUA operates and manages the National Credit Union Share Insurance Fund, insuring the deposits of more than 98 million account holders in all federal credit unions and the overwhelming majority of state-chartered credit unions. At MyCreditUnion.gov and Pocket Cents, NCUA also educates the public on consumer protection and financial literacy issues..