Credit Union Delinquencies, Charge-offs Fall

Fastest First-Quarter Loan Growth in 5 Years as More Than 800,000 Members Added

ALEXANDRIA, Va. (May 30, 2013) – Federally insured credit unions experienced a decline in delinquencies and charge-offs in the first quarter of 2013, while loans grew faster than in any first quarter since 2008, the National Credit Union Administration reported today. The data reflect continuing overall improvement in the credit union industry’s performance.

“As the economic recovery continues, American families are re-gaining their financial footing and so are federally insured credit unions,” NCUA Board Chairman Debbie Matz said. “It’s encouraging to see delinquencies and charge-offs falling as loan portfolios and membership continue to grow. During the first quarter, the credit unions closed in on $600 billion in total loans and added more than 800,000 members to reach 94.6 million Americans.

“While there are many positive signs in these statistics, I remain concerned about the disparate recovery of credit unions by asset size. The 423 largest credit unions had a return on average assets of 100 basis points for the quarter. In comparison, 2,279 credit unions with less than $10 million in assets had a return on average assets of negative 14 basis points, and 3,007 credit unions with $10 million to $100 million in assets had a return on average assets of 30 basis points.”

NCUA released new industry figures based on Call Report data submitted to and compiled by the agency for the quarter ending March 31, 2013.

Delinquency and Charge-Off Declines Continue
The delinquency ratio of federally insured credit unions declined in the first quarter, shedding 14 basis points to 1.02 percent. Credit unions’ net charge-off ratio also dropped significantly by 12 basis points, to 0.61 percent. The declines reflect significant improvement from the highs of 1.84 percent for delinquencies and 1.21 percent for charge-offs reached in 2009.

New bankruptcy filings by federally insured credit union members in the first quarter of 2013 rose from the previous quarter, but remained below the levels of the first quarter of 2012. Credit unions reported 64,495 members filing for bankruptcy in the first quarter of 2013. The percentage of loan charge-offs due to bankruptcy dropped to 19.3 percent from 21.5 percent in the previous quarter.

Loan Growth Continues for Eighth Quarter in a Row
Federally insured credit unions reported $599.9 billion in total loans, up $2.3 billion in the first quarter of 2013, the eighth consecutive quarter of loan growth. This loan growth was the fastest pace for the first quarter since 2008.

For the first quarter, lending grew in most categories:

  • First mortgage real estate loans increased by 1.0 percent to $248.5 billion, up $2.3 billion.
  • New auto loans expanded by 2.0 percent to $64.6 billion, up $1.3 billion.
  • Used auto loans rose 1.5 percent to $116.9 billion, up $1.7 billion.
  • Net member business loan balances grew 1.9 percent to $42.5 billion, up $790.3 million.
  • Non-federally insured student loans jumped 11.0 percent to $2.2 billion, up $221.9 million.

“We continue to remind credit unions to guard against long-term risks,” Matz added. “In particular, first mortgages, many of which are at fixed rates, grew as a share of the industry’s total loans during the quarter. This could lead to problems when interest rates inevitably rise. In addition, the total amount of non-federally guaranteed student loans jumped 11 percent for the quarter. A new line of business for many credit unions, these loans often have higher delinquencies in the long term.”

More Than 2 Million Members Added in the Last Year
Federally insured credit unions added 808,006 members in the first quarter to reach a new high of 94.6 million. In all, credit unions have added 2.1 million members in the last four quarters. While credit unions added members, the number of federally insured credit unions declined to 6,753, a drop of 66 for the quarter. The decline is consistent with recent industry trends.

Total Assets, Net Worth and Total Savings Rise
Credit unions’ total assets grew by $33.6 billion in the first quarter to $1.06 trillion, an increase of 3.3 percent from the fourth quarter and another record high. Industry net worth rose to $108.8 billion, up $2.1 billion for the quarter.

Because asset growth outpaced net worth growth, credit unions’ net worth ratio fell slightly during the quarter to 10.31 percent. The industry, however, remains well-capitalized with 95.8 percent of all federally insured credit unions reporting a net worth above 7.0 percent.

Share and deposit accounts at credit unions grew by $32.0 billion overall in the first quarter to nearly $910.0 billion, up 3.7 percent. Regular shares, share drafts, money market shares and non-member deposits all showed quarterly increases, while share certificates experienced a slight decline and IRA/Keogh accounts remained steady.

First-Quarter Earnings Rise as Return on Average Assets Remains Healthy
For the first quarter, federally insured credit unions had a net income of nearly $2.2 billion, slightly above the industry’s results in the last quarter of 2012. The industry’s return on average assets ratio fell by 3 basis points in the first quarter of 2013 but remained healthy at 83 basis points.

Larger Credit Unions Outperform Industry
The performance of the largest federally insured credit unions with more than $500 million in assets again exceeded industry averages. Smaller credit unions continued to have higher net worth, but lagged behind in earnings, net worth, loan and membership growth.

The largest credit unions had a higher return on average assets. They also had net worth growth of 10.5 percent, loan growth of 3.1 percent, and membership growth of 5.0 percent. As a whole, the industry had net worth growth of 2.0 percent, loan growth of 0.4 percent, and membership growth of 0.9 percent for the quarter.

For more information about the performance of the credit union industry, NCUA makes the complete details of the March 2013 Call Report available here. A summary for the quarter 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 nearly 94 million account holders in all federal credit unions and the overwhelming majority of state-chartered credit unions.


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