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Loan Growth Continues, Loan Losses Fall in Second Quarter

ALEXANDRIA, Va. (Sept. 3, 2015) – More than 101 million Americans had joined credit unions by the end of the second quarter of 2015, and the system continued to expand lending to meet those members’ needs, the National Credit Union Administration reported today.

“Across America, there’s a growing recognition that credit unions offer solid value to their members,” NCUA Board Chairman Debbie Matz said. “More people see credit unions as an affordable financial services alternative. Credit unions continue to increase lending while taking steps to shed certain investments that would pose risk when interest rates inevitably begin to rise. All these trends are signs of a robust system.”

NCUA released the new figures today based on Call Report data submitted to and compiled by the agency for the quarter ending June 30, 2015.

Membership Hits New High, as Steady Consolidation Continues

Membership in federally insured credit unions grew to 101,084,138 at the end of the second quarter of 2015, an increase of more than three million from the end of the second quarter of 2014.

The number of federally insured credit unions fell to 6,159 at the end of the second quarter, 270 fewer than at the end of the second quarter of 2014, a decline of 4.2 percent. The decline is consistent with longstanding trends for financial institutions.

Auto, Real Estate Lending Lead Loan Growth in Second Quarter

Total loans at federally insured credit unions reached $745.2 billion in the second quarter of 2015, an increase of 3.2 percent from the previous quarter and 10.6 percent from a year earlier.

Over the year ending in the second quarter of 2015, loans grew across all asset sizes and in every major category, including:

• New auto loans grew to $92.8 billion, up 3.9 percent from the previous quarter and up 19.5 percent from the second quarter of 2014.
• Used auto loans increased to $152.9 billion, up 3.8 percent from the previous quarter and up 13 percent from the second quarter of 2014.
• Total first mortgage loans outstanding reached $306.2 billion, up 3.1 percent from the previous quarter and up 9.6 percent from the second quarter of 2014. Fixed-rate first mortgage loans made up 59.3 percent of first mortgage loans outstanding at the end of the second quarter.
• Second mortgage loans were $72.2 billion, up 0.9 percent from the previous quarter and up 2.4 percent from the second quarter of 2014.
• Net member business loan balances grew to $54.4 billion, up 2.9 percent from the previous quarter and up 11.2 percent from the second quarter of 2014.
• Non-federally guaranteed student loans stood at $3.3 billion, down 0.6 percent from the previous quarter but up 13.5 percent from the second quarter of 2014.
• Payday alternative loans outstanding at federal credit unions were $35.2 million, up 18.2 percent from the previous quarter and up 18.8 percent from the second quarter of 2014.

The loans-to-shares ratio at the end of the second quarter was 75.5 percent, up 2.2 percentage points from the previous quarter and up 3.9 percentage points from the end of the second quarter of 2014. The ratio is nearing the system’s rolling 10-year average of 76.3 percent.

Investments Decline, and Credit Unions Better Prepared for Interest Rate Hikes

Overall, total investments by federally insured credit unions stood at $279 billion at the end of the second quarter, a decline of 4.2 percent from the end of the second quarter of 2014. Compared to a year earlier, investments declined in all categories except those with maturities of one to three years, which increased 16.3 percent from a year earlier, to $108.6 billion. Investments with maturities greater than 10 years dropped 29.6 percent from the second quarter of 2014, to $4.8 billion.

As credit unions continued their efforts to prepare for interest rate risk, the system’s net long-term assets ratio fell to 32.6 percent in the second quarter. Credit unions with less than $10 million in assets had the lowest net long-term asset ratio of any peer group at 11 percent. In comparison, credit unions with more than $500 million in assets had a ratio of 33.6 percent.

Credit Unions Report Positive Net Income for 22 Consecutive Quarters

Net income for federally insured credit unions was $2.4 billion in the second quarter, an increase of $96.1 million, or 4.2 percent, from the second quarter of 2014. As a whole, federally insured credit unions have recorded positive net income for 22 straight quarters.

This ongoing trend contributed to a rise in the system’s average net worth. The aggregate net worth ratio reached 10.92 percent at the end of the second quarter, up 16 basis points from a year earlier 

Delinquencies Tick Up as Charge-Offs Tick Down

The delinquency ratio at federally insured credit unions rose slightly in the second quarter, to 74 basis points, up from 69 basis points the previous quarter, but still well below the 85 basis-point level in the second quarter of 2014. The net charge-off ratio declined to an annualized 46 basis points year-to-date from 49 basis points at the end of the second quarter of 2014. 

The percentage of year-to-date loan charge-offs due to bankruptcy in the second quarter was 17.3, 198 basis points below the end of the second quarter of 2014.

Return on Average Assets at 81 Basis Points

Federally insured credit unions’ year-to-date return on average assets ratio stood at an annualized 81 basis points at the end of the second quarter, equal to the level in the second quarter of 2014. Overall, 77 percent of federally insured credit unions reported positive returns on average assets for the first half of 2015, compared to 74 percent in the first half of 2014.

Percentage of Well-Capitalized Credit Unions Rises

The great majority of federally insured credit unions remain well-capitalized, with 97.6 percent reporting a net worth ratio at or above the statutorily required 7 percent at the end of the second quarter. A year earlier, 97 percent of credit unions were well-capitalized. As of June 30, 2015, less than one percent of federally insured credit unions were undercapitalized.

Assets and Shares Grow During the Quarter

Total assets in federally insured credit unions grew to $1.17 trillion at the end of the second quarter of 2015, a rise of $64.9 billion, or 5.9 percent, from the end of the second quarter of 2014.

Overall, share and deposit accounts at federally insured credit unions increased $46.5 billion from the end of the second quarter of 2014 to $986.8 billion. Rate-sensitive money market accounts rose by $8.1 billion from the second quarter of 2014.  

Credit Unions over $500 Million Lead System Growth

Federally insured credit unions with more than $500 million in assets paced the system’s growth in most performance measures in the second quarter of 2015. With $827.8 billion in combined assets, these 467 credit unions held more than seven out of ten dollars of total system assets at the end of the quarter. This group of credit unions also reported the strongest growth in loans and membership and the highest return on average assets.

Credit unions with assets of less than $10 million recorded positive loan growth, and had a higher net worth ratio than other peer groups, but membership declined in the first half of 2015.

The table below provides a summary of federally insured credit unions’ current ratios and growth during the first half of 2015 by asset size for selected metrics: 

 

For more information about the performance of federally insured credit unions, NCUA makes the complete details of the June 2015 Call Report available online here. A summary of second-quarter performance is available here, and financial trends data for federally insured credit unions are available here.