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NCUA: Credit Union Expansion Continued during First Quarter

​Higher Interest Rates and Long-Term Investment Growth Remain of Concern

ALEXANDRIA, Va. (June 3, 2014) – America’s credit union system continued to grow during the first quarter of 2014, although higher interest rates during the first quarter that slowed mortgage originations and ongoing growth in long-term investments are still concerns, the National Credit Union Administration reported today.
 
“The continued growth in credit union lending and gains in membership during the first quarter are positive signs,” NCUA Board Chairman Debbie Matz said. “Investing in people and communities will produce dividends for credit unions in many respects, but the higher interest rate environment of late 2013 and the first quarter of 2014 slowed mortgage originations. To protect the Share Insurance Fund, NCUA continues to closely monitor the risks posed by rising interest rates, long-term investments and fixed-rate mortgages.”
 
NCUA today released the new figures based on Call Report data submitted to and compiled by the agency for the quarter ending March 31, 2014.
 
Outstanding Loans Up 8.8 Percent during the Past Year
In the first quarter of 2014, outstanding loan balances were up 8.8 percent from the first quarter of 2013 to $652.7 billion.  Year-over-year:
 
  • New auto loans grew 13.9 percent to $73.5 billion.
  • Used auto loans increased 11.3 percent to $130.1 billion.
  • Net member business loan balances rose 11.1 percent to $47.3 billion.
  • Non-federally guaranteed student loans went up 26.5 percent to $2.8 billion.
  • Short-term small loan originations, a consumer-friendly alternative to predatory payday loans, totaled $92.1 million at an annualized rate, up 34.8 percent from the first quarter of 2013. 
First mortgage real estate loans reached $272.6 billion, up 9.7 percent from the first quarter of 2013. Slightly more than 61 percent of first mortgage loans in the latest reports had fixed rates.
 
Notably, the pace of mortgage originations dropped significantly in the first quarter. Credit unions originated an annualized $42.6 billion in fixed-rate, first real estate loans in the first quarter, down from $102.9 billion in the first quarter of 2013. The decline largely reflects a reduction in mortgage refinancing activity and is consistent with the slowdown in the housing market during the quarter.
 
The growth in total loans contributed to a 3.3 percentage point rise in the overall loans-to-shares ratio relative to a year ago, to 69.2 percent, the highest first-quarter ratio since 2010.

Investments Trend Longer
Credit unions continued to add long-term investments to their portfolios despite a year-over-year overall decline in investments. Federally insured credit unions’ investments totaled $291 billion at the end of the first quarter, a decline of $1.7 billion, or 0.6 percent, from the first quarter of 2013.
 
Investments with maturities of three years or less fell $22 billion, while investments with maturities greater than three years grew $20.5 billion. The increase in long-term investments could pose interest rate risk for federally insured credit unions as interest rates rise.
 
Membership Growth Picks up Pace, Consolidation Trend Continues
Membership in federally insured credit unions grew by 831,635 in the first quarter of 2014, reaching a new high of 97.1 million.
 
The number of federally insured credit unions fell to 6,491 at the end of the first quarter, 262 fewer than at the end of the first quarter of 2013, a decline of 3.9 percent. The decline is consistent with the trend of the last 40 years as the consolidation of federally insured credit unions continues.
 
Return on Average Assets Steady, Quarterly Earnings Slow
Federally insured credit unions’ return on average assets ratio remained at 78 basis points at the end of the first quarter, equal to the 2013 year-end figure and down 5 basis points from a year earlier. Net income in the quarter ending March 31 was $2.1 billion, down slightly from a year earlier.
 
Interest income rose $241.9 million from a year earlier, to $9 billion for the quarter, while non-interest income fell $248.6 million for the quarter, with declines in both fee income and other operating income. The decline in non-interest income is partially due to a reduction in mortgage refinancing activity, a result of the rise in longer-term interest rates that began in the late spring of 2013. Expenses in the first quarter of 2014 were up slightly.
 
Credit Unions Remain Well-Capitalized; Net Worth Up Over the Past Year
The aggregate net worth ratio was 10.61 percent at the end of the first quarter, 16 basis points below the ratio in the previous quarter, but 31 basis points higher than the end of the first quarter of 2013.
 
Overall, federally insured credit unions remain well-capitalized, with 96 percent reporting a net worth at or above the statutorily required 7.0 percent. The percentage of well-capitalized credit unions is up about a percentage point from the first quarter of 2013.
 
Assets Continue Rise, Shares Grow
Federally insured credit unions’ total assets grew $42.6 billion, or 4.0 percent, from the first quarter of 2013, to reach $1.1 trillion. Overall, share and deposit accounts rose 3.6 percent over the year to $943.1 billion, compared to $910 billion at the end of the first quarter of 2013. Growth in deposits in regular shares and share drafts—up 7.3 percent from the first quarter of 2013—outpaced the 0.6 percent growth in other deposits, which tend to be more sensitive to changes in interest rates.
 
Delinquency and Charge-Off Ratios, Bankruptcy Losses Decline
Delinquency and net charge-off ratios for federally insured credit unions declined again in the first quarter. The delinquency ratio fell to 0.81 percent from 1.02 percent in the first quarter of 2013. The net charge-off ratio was 50 annualized basis points, down from 61 basis points a year earlier.
 
The percentage of loan charge-offs due to bankruptcy declined to 18.4 percent, below the 19.3 percent level at the end of the first quarter of 2013.
 
Larger Credit Unions Again Outperform Smaller Credit Unions
Federally insured credit unions with more than $500 million in assets still led in most performance measures. These 445 credit unions held $751 billion in combined assets, 68 percent of the system’s total assets during the quarter. They also reported a higher return on average assets than credit unions as a whole.
 
Credit unions with less than $100 million in assets 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’ current ratios and growth from the first quarter of 2013 to the first quarter of 2014 by asset size for selected metrics follows: 
 
 
Above
$500 million
$100 million to $500 million
$10 million to
$100 million
Under
$10 million
Net Worth Ratio
10.5 percent
10.6 percent
11.5 percent
14.4 percent
Net Worth
Ç 9.3 percent
Ç 6.0 percent
Ç 2.9 percent
È 1.3 percent
Loans
Ç 10.9 percent
Ç 7.5 percent
Ç 3.5 percent
Ç 1.1 percent
Membership
Ç 5.3 percent
Ç 1.8 percent
È 1.1 percent
È 2.1 percent
Return on Average Assets
93 basis points
54 basis points
30 basis points
-4 basis points
 
For more information about the performance of federally insured credit unions, NCUA makes the complete details of the March 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 97 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..

--NCUA--

National Credit Union Administration

Office of Public & Congressional Affairs

703.518.6330
pacamail@ncua.gov

Contacts:

John Fairbanks
Office: 703.518.6336
jfairbanks@ncua.gov

Ben C. Hardaway
Office: 703.518.6333
Mobile: 703.298.5223 bhardaway@ncua.gov

Kenzie Snowden
Office: 703.518.6334
ksnowden@ncua.gov

"Protecting credit unions and the consumers who own them through effective regulation"