ALEXANDRIA, Va. –New credit union financial performance data released by NCUA show delinquencies, especially in credit cards, taking a jump during the second quarter of the year, with credit unions responding by significantly increasing their provisions for loan losses.
It should be noted, however, that delinquencies are highest among credit unions with assets of $50 million or below, with the delinquency rate at CUs of less than $10 million at 1.40 as of June 30, while the delinquency rate at credit unions between $10-$50 million was 0.84. It is 20 to 30 basis points lower in all other asset categories.
Overall, assets federally insured CUs increased $82 billion, or 3.8%, over the year ending in the second quarter of 2023, to $2.22 trillion. Net income also decreased when compared with the first half of 2022, in part due to those loan provisions.
NCUA reported total loans outstanding rose $175 billion, or 12.6%, to $1.56 trillion. Insured shares and deposits also grew $31 billion, or 1.8%, to $1.72 trillion, from one year earlier.
‘Well-Positioned,’ But…
“The latest quarterly data indicate the credit union system is — overall — generally well positioned,” said NCUA Chairman Todd M. Harper in a statement. “The increase in credit union membership, assets, loans outstanding, and insured shares and deposits give us reason for cautious optimism; cautious because the second quarter data highlight a few areas of concern. Namely, a rise in delinquency rates and charge offs and a slight decline in insured shares.”
The data was released as part of NCUA’s Quarterly Credit Union Data Summary and is based on information from 4,686 federally insured credit unions as of June 30. Those CUs represent 137.7 million members, NCUA said.
The Highlights
Among the data highlighted in the new report:
- Net income for federally insured credit unions in the first half of 2023 totaled $17.4 billion at an annual rate, down $0.4 billion, or 2.1%, from the first half of 2022.
- Interest income rose $28.8 billion, or 45.3%, over the year to $92.3 billion at an annual rate in the first half of 2023. Non-interest income grew $1.2 billion, or 4.9%, to $24.5 billion annualized, largely due to an increase in other non-interest income.
- The credit union system’s provision for loan and lease losses or credit loss expenses increased $5.8 billion, or 169.5%, to $9.2 billion at an annual rate in the first half of 2023.
- The delinquency rate at federally insured credit unions was 63 basis points in the second quarter of 2023, up 15 basis points, or 31%, compared with the second quarter of 2022. The credit card delinquency rate rose to 154 basis points from 107 basis points one year earlier. The auto loan delinquency rate increased 22 basis points over the year to 67 basis points in the second quarter.
- The net charge-off ratio for all federally insured credit unions was 53 basis points in the second quarter of 2023, up 24 basis points compared with the second quarter of 2022.
- Total shares and deposits rose by $23.0 billion, or 1.2%, over the year to $1.88 trillion in the second quarter of 2023. Regular shares declined by $75.1 billion, or 10.9%, to $614.1 billion. Other deposits increased by $97.5 billion, or 12.5%, to $879.9 billion, led by share certificate accounts, which grew $164.5 billion, or 68.6%, over the year to $404.5 billion.
- The credit union system’s net worth increased by $13.2 billion, or 5.9%, over the year to $235.9 billion. The aggregate net worth ratio — net worth as a percentage of assets — stood at 10.63% in the second quarter of 2023, up from 10.42% one year earlier. Beginning in the first quarter of 2023, this ratio excludes the CECL transition provision, NCUA said.