Lending Was Up in All Asset Groups During Q1, But Not Membership Growth; What a Difference a Year Makes in Interest Expense, NCUA Report Shows

ALEXANDRIA, Va.—Lending was up nearly 20% at credit unions in the first quarter of this year, with every asset category reporting loan growth, according to new data from NCUA, which also reveals what a difference a year makes, as interest expense was up by nearly 220% at CUs compared to one year earlier.

While the lending numbers are strong, NCUA’s new Quarterly Credit Union Data Summary for Q1 shows membership grew only at CUs of more than $1 billion in assets or more, with every other asset category showing declining membership. 

Also during the first quarter, total assets rose by $93 billion (4.4%) to $2.21 trillion, while insured shares and deposits rose $39 billion (2.3%) to $1.73 trillion, from one year earlier, the agency said. 

“Within the credit union system, we have experienced continued growth in lending, along with increases in assets and insured shares. This is good news,” NCUA Chairman Todd M. Harper said in a statement accompanying release of the data. “But warning signs are also flashing on the horizon, like the rise in home equity lines of credit, increases in credit card balances, and higher delinquency rates. Credit unions must remain nimble in this high interest rate environment and work with members to navigate through any economic challenges that lie ahead.” 

The NCUA’s Quarterly Credit Union Data Summary provides an overview of the financial performance of federally insured credit unions based on information reported to the agency in the first quarter of 2023. As of March 31, 2023, there were 4,712 federally insured credit unions with 136.6 million members, according to the report.

Report Highlights

The topline findings in the Q1 data include:         

• Total assets in federally insured credit unions rose by $93 billion, or 4.4%, over the year ending in the first quarter of 2023, to $2.21 trillion.
• Total loans outstanding increased $229 billion, or 17.6%, over the year, to $1.53 trillion. The average outstanding loan balance in the first quarter of 2023 was $17,310, up $963, or 5.9%, from one year earlier.
• The delinquency rate at federally insured credit unions was 53 basis points in the first quarter of 2023, up 10 basis points from one year earlier. The net charge-off ratio was 52 basis points, up 24 basis points compared with the first quarter of 2022.
• Insured shares and deposits rose $39 billion, or 2.3%, over the year ending in the first quarter of 2023, to $1.73 trillion.
• The loan to share ratio stood at 81.0% in the first quarter of 2023, up from 70.3% in the first quarter of 2022.
• The credit union system’s net worth ratio was 10.49% in the first quarter of 2023, compared with 10.21% one year earlier. (The agency noted that beginning in the first quarter of 2023, this ratio excludes the Current Expected Credit Loss (CECL) transition provision.)
• Net income totaled $17.7 billion at an annual rate in the first quarter of 2023, down $0.6 billion, or 3.0%, compared with the same period a year earlier.
• The net interest margin for federally insured credit unions was $65.9 billion at an annual rate in the first quarter of 2023, or 3.01% of average assets. That compares with $53.8 billion, or 2.57% of average assets, in the first quarter of 2022.
• The annualized return on average assets for federally insured credit unions was 81 basis points in the first quarter of 2023, down from 87 basis points in the first quarter of 2022. The median annualized return on average assets across all federally insured credit unions was 61 basis points, up 20 basis points from a year earlier.
• The number of federally insured credit unions declined to 4,712 in the first quarter of 2023, from 4,903 in the first quarter of 2022. In the first quarter of 2023, there were 2,950 federal credit unions and 1,762 federally insured, state-chartered credit unions. The year-over-year decline is consistent with long-running industry consolidation trends.
• The number of credit unions with a low-income designation declined to 2,596 in the first quarter of 2023 from 2,622 one year earlier. However, their share increased from 53% of all federally insured credit unions in the first quarter of 2022 to 55% in the first quarter of 2023.
• The number of complex federally insured credit unions (those with total assets greater than $500 million) rose to 712 from 701 one year earlier. Some 413 opted into the Complex Credit Union Leverage Ratio (CCULR) framework with an average CCULR of11.52%, NCUA said, while  299 reported under the Risk-Based Capital (RBC) framework with an average RBC ratio of 15.12%.
• Federally insured credit unions added 5.7 million members over the year, and credit union membership in these institutions reached 136.6 million in the first quarter of 2023.

Balance Sheet Details

• Cash declined $86.6 billion, or 34.8%, to $162.1 billion. NCUA noted that the 2022Q1 Call Report redefined cash to exclude cash equivalents (investments with original maturities of three months or less). Cash now represents cash on hand and cash on deposit.
• Total investments fell $36.9 billion, or 7.9%, to $429.1 billion. The agency noted that the 2022Q1 Call Report introduced a new definition for total investments on the investment maturity schedule. Refer to the Notes to Users for additional information.
• Investments with maturities less than or equal to one year declined $5.3 billion, or 5.5%, to $90.0 billion.
• Investments with maturities of one to three years edged up $0.2 billion, or 0.2%, to $114.8 billion.
• Investments with maturities of three to five years fell $31.8 billion, or 26.8%, to $86.5 billion.
• Investments with maturities of five to 10 years declined $4.5 billion, or 3.8%, to $113.6 billion.
• Investments with maturities greater than 10 years increased $4.5 billion, or 22.8%, to $24.1 billion.

The Loan Portfolio

• Total loans outstanding increased $228.6 billion, or 17.6%, over the year, to $1.53 trillion. NCUA noted that the 2022Q1 Call Report redefined the loans variable to include loans to natural person credit unions, which were previously reported as investments. Credit union loan balances rose in all major categories, compared with the first quarter of 2022, the agency said.
• Loans secured by 1- to 4-family residential properties increased $94.9 billion, or 16.5%, to $669.6 billion in the first quarter of 2023.
• Auto loans increased $75.1 billion, or 18.0%, to $493.1 billion. Used auto loans rose $44.6 billion, or 16.3%, to $317.5 billion, and new auto loans rose $30.5 billion, or 21.1%, to $175.6 billion.
• Credit card balances grew by $9.7 billion, or 15.1%, to $74.2 billion.
• Non-federally guaranteed student loans increased $0.6 billion, or 7.9%, to $7.5 billion.
• Commercial loans, excluding unfunded commitments, increased $26.1 billion, or 22.2%, over the year to $143.6 billion in the first quarter of 2023.

Delinquencies

• The delinquency rate at federally insured credit unions was 53 basis points in the first quarter of 2023, up 10 basis points compared with the first quarter of 2022.
• The delinquency rate on non-commercial real estate loans was 30 basis points in the first quarter of 2023, one basis point lower than in the first quarter of 2022.
• The credit card delinquency rate rose to 148 basis points from 101 basis points one year earlier.
• The auto loan delinquency rate increased 19 basis points over the year to 58 basis points in the first quarter of 2023.
• The delinquency rate for commercial loans, excluding unfunded commitments, was 34 basis points in the first quarter of 2023, compared with 43 basis points in the first quarter of 2022.
• The net charge-off ratio for all federally insured credit unions was 52 basis points in the first quarter of 2023, up 24 basis points compared with the first quarter of 2022.

Liabilities and Net Worth

• Total shares and deposits rose by $37.6 billion, or 2.0%, over the year to $1.89 trillion in the first quarter of 2023. Regular shares declined by $44.3 billion, or 6.5%, to $641.7 billion. Other deposits increased by $76.3 billion, or 9.8%, to $854.0 billion, led by share certificate accounts, which grew $120.8 billion, or 50.1%, over the year to $362.2 billion.
• The credit union system’s net worth increased by $15.5 billion, or 7.2%, over the year to $231.9 billion. The aggregate net worth ratio — net worth as a percentage of assets — stood at 10.49% in the first quarter of 2023, up from 10.21% one year earlier. (NCUA noted that beginning in the first quarter of 2023, this ratio excludes the CECL transition provision.)
• The net worth ratio for prompt corrective action was 10.76% in the first quarter of 2023. This ratio considers the CECL Transition Provision, as applicable, NCUA said.

Income Statement Details

• Net income for federally insured credit unions in the first quarter of 2023 totaled $17.7 billion at an annual rate, down $0.6 billion, or 3.0%, from the first quarter of 2022. Interest income rose $28.0 billion, or 45.8%, over the year to $89.0 billion annualized. 
• Non-interest income declined $0.3 billion, or 1.3%, to $24.0 billion annualized, partly due to a drop in other income.
• Interest expense totaled $23.1 billion annualized in the first quarter of 2023, up $15.8 billion, or 217.4%, from one year earlier. Non-interest expense grew $6.5 billion, or 11.4%, over the year to $63.5 billion at an annual rate in the first quarter of 2023. 
• Rising employee compensation and benefits, which were up $3.5 billion, or 11.7%, accounted for about half of the increase in non-interest expenses.
• The aggregate net interest margin widened by $12.2 billion, or 22.6%, over the year to $65.9 billion at an annual rate in the first quarter of 2023.
• The credit union system’s provision for loan and lease losses or credit loss expense increased $5.9 billion, or 203.3%, to $8.8 billion at an annual rate in the first quarter of 2023. 

Performance by Asset Category  

NCUA noted again that consistent with long-running trends, credit unions with assets of at least $1 billion reported the strongest growth in loans, membership, and net worth over the year ending in the first quarter of 2023.

Looking to credit unions according to assets, the new NCUA quarterly report notes:

• The number of federally insured credit unions with assets of at least $1 billion increased to 426 in the first quarter of 2023 from 410 in the first quarter of 2022. These 426 credit unions held $1.7 trillion in assets, or 76% of total system assets. Credit unions in this category reported loan growth of 20.1% over the year. Membership rose 7.3%. Net worth increased 8.5%.
• The number of federally insured credit unions with assets of at least $500 million but less than $1 billion declined to 286 in the first quarter of 2023 from 291 in the first quarter of 2022. These 286 credit unions held $207.1 billion in total assets, or 9% of total system assets. Credit unions in this category reported 9.2% growth in total loans outstanding over the year. Membership declined 2.7%, while net worth increased 3.8%.
• The number of federally insured credit unions with at least $100 million but less than $500 million in assets declined to 1,066 in the first quarter of 2023 from 1,084 in the first quarter of 2022. These 1,066 credit unions held $244.6 billion in total assets, or 11% of total system assets. Credit unions in this category reported a 10.9% increase in total loans outstanding over the year. Membership fell 1.4%. Net worth rose 4.4%.
• The number of federally insured credit unions with at least $50 million but less than $100 million in assets declined to 655 in the first quarter of 2023 from 694 one year earlier. These 655 credit unions held $47.9 billion in total assets, or 2% of total system assets. Credit unions in this category reported a 5.5% increase in total loans over the year. Membership fell 5.6%. Net worth rose 0.5%%.
• The number of federally insured credit unions with assets of at least $10 million but less than $50 million declined to 1,329 in the first quarter of 2023 from 1,410 in the first quarter of 2022. These credit unions held $35.0 billion in assets, or less than 2% of total system assets. Credit unions in this category reported a 9.6% increase in loans over the year. Membership declined 4.0%, and net worth edged up 0.1%.
• The number of federally insured credit unions with less than $10 million in assets declined to 950 in the first quarter of 2023 from 1,014 in the first quarter of 2022. These credit unions held $4.0 billion in assets, or 0.2% of total system assets. Credit unions in this category reported an 8.9% increase in loans over the year. Membership fell 5.3%. Net worth edged up 0.3%.

Where to Get Additional Information

NCUA reminded it makes credit union system performance data available online in the Credit Union Analysis section of NCUA.gov. The analysis section includes quarterly data summaries as well as detailed financial information, a graphics package illustrating financial trends in federally insured credit unions, and a spreadsheet listing all federally insured credit unions as of March 31, 2023, including key metrics.

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