ALEXANDRIA, Va.–NCUA has officially confirmed what many credit unions are already seeing every day: lending was up in all categories during Q3 2014.
Indeed, the agency noted federally-insured CUs had their strongest quarterly growth rate since Q1 of 2006.
“The fact that credit unions are turning towards making loans and reducing their reliance on long-term investments is encouraging,” said NCUA Chairman Debbie Matz in a statement. “A loan to a member is the best investment a credit union can make and benefits members directly.”
Among the data released by NCUA for Q3:
- Outstanding loans are up 10.1% since Q3 2013. Total loans now stand at $695.3 billion. Year-over-year, new auto loans grew 19.4% to $82.4 billion; used auto loans increased 12.2% to $140.3 billion; member business loan balances rose 12.6% to $50.4 billion, and non-federally guaranteed student loans expanded 21.9% to $3.1 billion.
- Mortgage lending shows housing rebound. First mortgage real estate loans reached $286.4 billion, up 9.1% from a year earlier. Sixty percent of first mortgage loans outstanding had fixed rates, NCUA said. Second-mortgage loans rose 1.1% for the year ending Sept. 30 to $71.5 billion. Prior to the third quarter of 2014, second-mortgage loans had contracted year-over-year since the second quarter of 2009, the agency noted.
- Loan-so-share ratio numbers worth sharing. NCUA said growth in total loans over the year, combined with modest deposit growth, resulted in a continued upswing in loan-to-share ratio, which grew 4.3 percentage points to 74%, the highest ratio since the fourth quarter of 2009.
- Long-term investments continue to decline. Total investments by federally insured credit unions (excluding cash on deposit and cash equivalents) declined slightly from the previous quarter to $288.4 billion. Total investments fell $5.1 billion, or 1.7%, from the third quarter of 2013, NCUA said. Investments with maturities of one to three years rose $2.9 billion from the previous quarter and $2.4 billion from the third quarter of 2013. Investments with maturities greater than three years declined $5.8 billion from the previous quarter and by $3.5 billion from the end of the third quarter of 2013.As a share of assets, total investments declined slightly from the previous quarter to 26%. Long-term investments (those with maturities of at least three years) were 11.1% of assets, down from 12% in the third quarter of 2013. NCUA added, however, “Though stabilizing as a share of assets, high levels of long-term investments in the asset portfolio could pose interest-rate risk for credit unions as interest rates rise.”
- Membership at FICUs near 99-million, even as number of CUs shrink. Membership in federally insured credit unions grew by 808,900 in the third quarter of 2014 to 98.7 million. The number of federally insured credit unions fell to 6,350 at the end of the third quarter, 270 fewer than at the end of the third quarter of 2013, a decline of 4.1%, the agency said.
- ROA, net income are up. Federally insured credit unions’ return on average assets ratio rose to an annualized 83 basis points through the end of the third quarter, a slight increase from the previous quarter and three BPs above the third quarter of 2013. Net income through Sept. 30 was $6.8 billion, up 8.6% from a year earlier.
- Interest income grows. Interest income grew $484 million from a year earlier to $9.3 billion for the quarter. Non-interest income increased $132 million from the third quarter of 2013. Expenses in the third quarter of 2014 were up 0.9% from the third quarter of 2013, NCUA said.
- Net worth rises, CUs remain well-capitalized. The aggregate net worth ratio for federally insured credit unions was 10.93% at the end of the second quarter, 17 basis points higher than the previous quarter and 28 basis points higher than the end of the third quarter of 2013. Overall, federally insured credit unions remain well-capitalized, with 97.5% reporting a net worth ratio at or above the statutorily required 7%, compared to 96.6% at the end of the third quarter of 2013. Less than 1% of federally insured credit unions are below the adequately capitalized standard.
- Assets, shares are up. Federally insured credit unions’ total assets stood at $1.1 trillion, growing $51.2 billion, or 4.8% , from the third quarter of 2013. Overall, share and deposit accounts declined slightly from the previous quarter to $939.1 billion—possibly reflecting seasonal factors—but were 3.7% higher than the $906 billion at the end of the third quarter of 2013. Share drafts and regular shares each were up 7.3% from a year ago. All other deposits were up 0.7%.
- Delinquency and charge-off ratios steady; bankruptcy losses decline. Delinquency and net charge-off ratios for federally insured credit unions were flat between the end of the second quarter and the end of the third. The delinquency ratio remained at 0.85%, NCUA said, and was below the 1.02% ratio in the third quarter of 2013. The net charge-off ratio was 48 annualized BPs, down from 49 BPs in the previous quarter and down from 56 basis points a year earlier. The percentage of loan charge-offs due to bankruptcy at the end of the third quarter was 19.7%, below the 20.8% level at the end of the third quarter of 2013.
- Growth trends among large and small credit unions remain steady. Federally insured credit unions with more than $500 million in assets again led in nearly every performance measure during the third quarter. These 447 credit unions held more than $766 billion in combined assets, or 69% of the system’s total assets. They also reported faster growth and higher returns on average assets than the credit union system as a whole. Credit unions with assets of less than $10 million recorded higher net worth ratios but showed slower growth in loans, net worth and return on average assets, while membership declined (CUToday.info has reporting on this issue here).
The chart below summarizes credit unions’ current ratios and growth from the fourth quarter of 2013 to the third quarter of 2014 by asset size for selected metrics.