Federally Insured Credit Unions’ Net Worth Ratio Reaches Strongest Level in Five Years as Membership Hits New High
ALEXANDRIA, Va. (Aug. 29, 2013) – Second-quarter data show federally insured credit unions saw brisk loan growth, their highest net worth ratio since 2008 and record membership levels, the National Credit Union Administration reported today.
“The increases in lending, net worth and membership are especially positive signs,” NCUA Board Chairman Debbie Matz said. “The brisk loan growth shows that federally insured credit unions are meeting the needs of more borrowers and putting their assets to productive use. The net worth ratio rose to 10.5 percent, its highest level since 2008. Credit union membership continues to reach a new milestone each quarter.”
Loans were up 2.3 percent in the second quarter, and 5.5 percent in the last four quarters, the strongest four-quarter growth since the start of 2009.
“Although the industry is performing well overall, smaller credit unions continue to face challenges with making loans, generating earnings and attracting members,” Matz added. “NCUA is committed to providing assistance and support to ensure the viability of small credit unions so they can continue to serve local communities.”
NCUA released the new industry figures based on Call Report data submitted to and compiled by the agency for the quarter ending June 30, 2013.
Credit Union Membership Tops 95 Million
Membership in federally insured credit unions reached 95.2 million, a record high, in the second quarter of 2013. Membership grew by 560,670, or 0.6 percent. Nearly 2.1 million Americans have joined a credit union in the last four quarters.
While adding members, the number of federally insured credit unions dipped to 6,681, a drop of 72. The decrease is consistent with recent trends, as most consolidations were voluntary mergers.
Nine Consecutive Quarters of Loan Growth
Federally insured credit unions reported $613.7 billion in total loans in the second quarter of 2013, an increase of $13.8 billion over the previous quarter.
Lending by federally insured credit unions grew in nearly every category, including:
- First mortgage real estate loans rose to $253.8 billion, up 2.1 percent for the quarter and 5.6 percent year-over-year.
- New auto loans expanded to $66.4 billion, up 2.8 percent for the quarter and 10.7 percent for the last four quarters.
- Used auto loans rose to $121.3 billion, up 3.7 percent for the quarter and 9.3 percent for the year ending June 30.
- Net member business loan balances grew to $43.5 billion, up 2.3 percent for the quarter and 8.3 percent for the prior 12 months.
Net Worth Ratio Highest Since 2008; Assets Post Modest Increase
The industry’s net worth ratio stood at 10.5 percent of assets at the end of the second quarter, up 34 basis points from the end of the second quarter of 2012. The ratio is at its highest level since the fourth quarter of 2008.
Net worth grew 8.3 percent over the previous four quarters, well above the 4.8 percent rise in assets over the same period. Overall net worth climbed 2.0 percent from the first-quarter level, to $111.0 billion. Federally insured credit unions’ total assets grew by $669.3 million in the second quarter, an increase of 0.1 percent from the first quarter. The industry’s loans-to-shares ratio is now 67.5 percent.
The industry remains well-capitalized, with 96.2 percent of all federally insured credit unions reporting a net worth above 7.0 percent. In the prior quarter, 95.8 percent were well-capitalized.
Overall, share and deposit accounts at credit unions declined during the quarter by $464 million to $909.5 billion, but regular shares (savings), money market shares and IRA/Keogh accounts showed slight increases.
Delinquency and Charge-Off Ratios Remain Low
The delinquency ratio of federally insured credit unions for the second quarter of 2013 was 1.04 percent.
The industry’s net charge-off ratio declined to an annualized 58 basis points at the end of the second quarter. Since the second quarter of 2012, federally insured credit unions’ net charge-off ratio has declined by 17 basis points.
Federally insured credit unions reported 40,700 members filing for bankruptcy in the second quarter, a 36.6 percent decrease from the first quarter. Year-to-date bankruptcy filings, 104,939, were lower than at the end of the second quarter of 2012. The percentage of loan charge-offs due to bankruptcy rose to 20.6 percent from the first quarter’s 19.3 percent.
Second-Quarter Earnings Rise as Return on Average Assets Remains Healthy
Driven largely by increases in fee income and declines in loan-loss provisions, federally insured credit unions in the second quarter had a net income of more than $2.2 billion. The industry’s return on average assets ratio stood at an annualized 85 basis points at the end of the second quarter, inching closer to pre-crisis norms.
Larger Credit Unions Outperform Industry Again
Federally insured credit unions with more than $500 million in assets continued to lead the industry in most performance measures. With $705.0 billion in total assets, these credit unions held more than two-thirds of industry total assets during the quarter. They also reported a higher return on average assets than the industry as a whole.
Smaller credit unions once again 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’ quarterly performance by asset size for selected metrics follows:
|Net Worth Ratio
||↑ 10.4 percent
||↑ 7.0 percent
||↑ 3.2 percent
||↓ 0.6 percent|
||↑ 6.6 percent
||↑ 5.5 percent
||↑ 1.8 percent
||↓ 1.7 percent|
||↑ 4.9 percent
||↑ 3.0 percent
||↑ 0.9 percent
||↓ 2.5 percent|
|Return on Average Assets
For more information about the performance of federally insured credit unions, NCUA makes the complete details of the June 2013 Call Report available here. A summary for the second quarter’s 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 United States, NCUA operates
and manages the National Credit Union Share
Insurance Fund, insuring the deposits of more than 101
million account holders in all federal credit
unions and the overwhelming majority of
state-chartered credit unions. At
Pocket Cents, NCUA also educates the public on consumer protection and financial literacy issues.