FICUs Earn $7.84 Billion Through the First 9 Months of 2017

The National Credit Union Administration (NCUA) reported that federally-insured credit unions (FICUs) posted aggregate earnings of $7.84 billion through the first 3 quarters of 2017. In comparison, FICUs reported earnings of $7.27 billion for the same period of 2016 -- up 7.8 percent.

At the end of September 2017, FICUs had a return on average assets of 79 basis points -- up 2 basis points from June 2017 and 3 basis point from the end of 2016. The median return on average assets as of September 2017 was 39 basis points.

During the first 3 quarters of 2017, return on average assets was bolstered by higher net interest margin of 9 basis points and lower operating expenses of 4 basis points. This was offset by 6 basis points increase in provisions for loan and lease losses by 6 basis points, lower fee and other income by 4 basis points, and lower non-operating income by 1 basis point.

Net Worth

The industry's net worth increased by $7.8 billion to $148.6 billion. The industry's net worth ratio increased by 9 basis points during the quarter to 10.89 percent, but was unchanged from the end of 2016.

As of September 2017, 97.55 percent of FICUs had a net worth ratio of at least 7 percent. In comparison, 97.87 percent of FICUs had a net worth ratio of 7 percent or better at the end of 2016.

The number of undercapitalized credit unions increased by 11 during 2017 to 48 FICUs. In addition at the end of the third quarter of 2017, 9 credit unions were critically undercapitalized (net worth ratio below 2 percent) with five FICUs reporting a negative net worth ratio.

Loan, Share, and Asset Growth

FICUs reported strong asset, loan, and share (deposit) growth in 2017.

Assets at FICUs increased by $71.1 billion during 2017 to $1.36 trillion.

Loans at FICUs increased by annualized rate of 10.4 percent during the first 3 quarters of 2017 to almost $937 billion. All major loan categories have grown during 2017.

The number of outstanding loans at FICUs increased from 61 million at the end of 2017 to 63.7 million at the end of the third quarter of 2017. During the third quarter, the number of outstanding loans increased by 1.2 million.

Indirect lending helped to fuel expansion in credit union loans -- growing at an annual rate of 19.66 percent to $189.6 billion at the end of the third quarter of 2017. Indirect lending represented 20.23 percent of total credit union loans, up from 19.01 percent at the end of 2016.

FICUs reported shares and deposits of $1.15 trillion at the end of the third quarter of 2017. NCUA reported that shares at FICUs grew at an annualized rate of 7.09 percent through the first 9 months of 2017.

Since loan growth outpaced share growth, the loan-to-deposit ratio increased from 79.55 percent at the end of 2016 to 81.43 percent as of September 2017.

Delinquencies and Net Charge-Offs

Delinquent loans rose by $828 million over the last year to almost $7.4 billion. As a result, delinquency rates edged higher by 4 basis points during the third quarter of 2017 to 0.79 percent. A year ago, the delinquency rate was 0.77 percent.

Net charge-offs at FICUs increased by $538 million over the last year to $3.8 billion as of the end of the third quarter of 2017. The net charge-off rate was 56 basis points as of September 2017 -- up 3 basis points from a year ago.

Credit unions saw a $1 billion year-over-year increase in allowance for loan and lease losses to $8.6 billion. The industry's coverage ratio was 116.79 percent.

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