Credit Union Assets, Lending and Delinquencies Rise in Q2

NCUA Releases Second Quarter Credit Union System Performance Data

According to the latest financial performance data released today by the National Credit Union Administration, total assets in federally insured credit unions increased $82 billion, or 3.8 percent, over the year ending in the second quarter of 2023, to $2.22 trillion.

During the same period, total loans outstanding rose $175 billion, or 12.6 percent, to $1.56 trillion. Insured shares and deposits also grew $31 billion, or 1.8 percent, to $1.72 trillion, from one year earlier.

“The latest quarterly data indicate the credit union system is — overall — generally well positioned,” said NCUA Chairman Todd M. Harper. “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 chairman added during a press call that the data are telling a story of two consumers, one that has shifted their deposits to higher yielding accounts as share certificates jumped 69% in Q2, and another consumer who has spent down any savings left from COVID relief funds. The latter contributed to increased deliquencies on credit cards and auto loans in particular, as well as increased charge offs. The credit unions with the highest charge offs were also those that can likely best absorb them: those with more than $1 billion in assets. Federal credit unions of all sizes hit 65 basis points. Overall, the average was 53 basis points.

Credit cards took a good chunk of the blame: Balances were up 13.9% to $9.4 billion, while deliquencies on cards were also up to 154 basis points from 107 basis points one year earlier. During the press call, Chairman Harper noted that “credit card were elevated higher than what we would expect in the second quarter.” He also pointed out that Payday Alternative Loans were up 23% YOY to the tune of $48 million, another indicator of tough times for those who are just getting by.

The chairman pointedly added that NCUA examiners will not have a problem with credit unions taking “prudent measures” to help members out.

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 second quarter of 2023. As of June 30, 2023, there were 4,686 federally insured credit unions with 137.7 million members.

One silver lining was that after many months of contraction, the data showed a slight improvement in credit union’s liquidity. Overall credit unions are managing liquidity well, Chairman Harper said, however some individual credit unions - including a couple with more than $1 billion in assets - that are struggling.

NCUA Director of Examination and Insurance Kelly Lay directed credit unions to an interagency addendum regarding the importance of contingency funding plans, including use of the Federal Reserve Discount Window and the Central Liquidity Facility for credit unions.

Additional highlights from the NCUA’s Credit Union Data Summary for the second quarter of 2023 include:

• 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 percent, from the first half of 2022.

• Interest income rose $28.8 billion, or 45.3 percent, 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 percent, 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 percent, 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 percent, 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 percent, over the year to $1.88 trillion in the second quarter of 2023. Regular shares declined by $75.1 billion, or 10.9 percent, to $614.1 billion. Other deposits increased by $97.5 billion, or 12.5 percent, to $879.9 billion, led by share certificate accounts, which grew $164.5 billion, or 68.6 percent, over the year to $404.5 billion.

• The credit union system’s net worth increased by $13.2 billion, or 5.9 percent, over the year to $235.9 billion. The aggregate net worth ratio — net worth as a percentage of assets — stood at 10.63 percent in the second quarter of 2023, up from 10.42 percent one year earlier. Beginning in the first quarter of 2023, this ratio excludes the CECL transition provision.