Federally-Insured CUs Posted Strong Loan and Deposit Growth in 2016

The National Credit Union Administration (NCUA) reported that federally-insured credit unions (credit unions) had strong deposit and loan growth in 2016.

Total loans outstanding increased $82 billion, or 10.4 percent, over the year to $869.1 billion.

Compared to a year ago,

• New auto loans jumped by 16.8 percent to to $116.9 billion. 
• Used auto loans rose 12.3 percent to $181.8 billion. 
• Net member business loan balances, including unfunded commitments, increased 14.6 percent to $66.6 billion in the fourth quarter.

Indirect loans at credit unions rose from $136.55 billion at the end of 2015 to $165.07 billion at the end of 2016. Outstanding participation loans increased by $5.25 billion over the year to $29.25 billion as of December 31, 2016.

Insured shares and deposits rose $67 billion, or 7.0 percent, over the four quarters of 2016 to more than $1 trillion.

Due to loans growing at a faster pace than shares, the loans-to-shares ratio rose almost 210 basis points to 79.55 percent in the fourth quarter of 2016, up from 77.46 percent in the fourth quarter of 2015.

Net Income Up 10.6 Percent from a Year Ago

Net income totaled $9.6 billion in 2016, up $0.9 billion, or 10.6 percent, from 2015. Gross income increased by $5 billion over the last year to $60 billion at the end of 2016. Interest income rose 8.6 percent in 2016 to $42.6 billion and non-interest income increased 9.9 percent to $17.4 billion.

On the other hand, interest expense totaled $6.6 billion in 2016 up 8.8 percent from one year earlier. Non-interest expenses grew 6.9 percent to $38.7 billion in 2016. Rising labor expenses, which were up $1.3 billion, accounted for roughly half of the increase in non-interest expenses.

The credit union system’s provision for loan and lease losses rose $1 billion, or 24.8 percent, to $5.1 billion in 2016.

The return on average assets (ROA) edged higher by 2 basis points in 2016 to .77 percent. Factors increasing the industry's ROA compared to a year ago were higher net interest margin, higher fee and other income, lower operating expenses, and higher non-interest income. If it was not for the increase in provisions for loan losses, the industry's ROA would have been 6 basis points higher.

Delinquent Loans Increased in 2016

Delinquent loans rose from $6.39 billion at the end of 2015 to $7.22 billion at the end of 2016.

The delinquency rate on loans at federally insured credit unions was 83 basis points in the fourth quarter of 2016, little changed from 81 basis points one year earlier.

Net charge offs rose by 25 percent from a year ago to $4.56 billion. As a result, the net charge-off ratio for all federally insured credit unions was 55 basis points in the fourth quarter of 2016 -- up 7 basis points from a year ago.

Ninety-eight Percent of Credit Unions Have Net Worth Ratios of 7 Percent or Higher

The credit union system’s net worth increased by $9.3 billion, or 7.1 percent, over the year to $140.8 billion. The aggregate net worth ratio – net worth as a percentage of assets – stood at 10.89 percent in the fourth quarter of 2016, compared with 10.92 percent one year earlier.

At the end of 2016, 5,666 credit unions have a net worth ratio of 7 percent or higher. Less than one percent of credit unions were undercapitalized at the end of 2016.

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