Net Income Tops $10 Billion thru the First 3 Quarters of 2018

The National Credit Union Administration reported that federally insured credit unions (FICUs) reported $10.2 billion in net income thru the first nine months of 2018. This was just below the $10.4 billion in net income recorded for all of 2017.

The industry's return on average asset (ROAA) was 0.96 percent -- this was up from 0.90 percent as of June 2018 and 0.78 percent at the end of 2017.

The improvement in profitability during the third quarter (as a percentage of average assets) was driven by a 5 basis point increase in net interest margin, a 1 basis point increase in fee and other income, and a 3 basis point decline in provisions for loan and lease losses. A 2 basis point increase in operating expenses to 3.12 percent adversely impacted the profitability of credit unions during the quarter.

The median ROAA was 0.60 percent as of September 2018 -- this was up 8 basis points from 0.52 percent as of June 2018.

Net Worth Ratio Increases

The net worth for FICUs was $161.51 billion as of September 2018. The industry's aggregate net worth ratio was 11.21 percent -- this was up 20 basis points from the prior quarter.

Over 98 percent of FICUs (98.33 percent) had a net worth ratio of at least 7 percent, the minimum leverage ratio to be considered well capitalized. Only 23 FICUs had a net worth ratio below 6 percent and no FICU was critically undercapitalized with a net worth ratio below 2 percent.

Loans Grow, While Shares Largely Unchanged

FICUs reported $1.026 trillion in loans as of September 2018. This was up from $1.002 trillion at the end of the second quarter of 2018. Almost all major loan categories grew during the third quarter.

Indirect loans rose during the third quarter from $211.38 billion to $218.94 billion. Approximately 21.34 percent of all loans were indirect loans.

Share and deposit growth stalled in the third quarter. Total shares and deposits were $1.209 trillion as of September 2018. This was just barely above the $1.208 in shares and deposits as of June 2018.

Due to loans growing faster than shares during the third quarter, the loan-to-share ratio rose from 82.98 percent as of June 2018 to 84.91 percent as of September.

To help fund the loan growth, investments and cash at FICUs fell during the third quarter. Cash and short-term investments as a percent of assets declined from 12.19 percent as of June 2018 to 11.38 percent at the end of the third quarter of 2018. The 10-year average for the cash plus short-term investments to assets ratio is 14.69 percent. This might suggest greater scrutiny by regulators of FICUs' liquidity management practices.

Delinquency Rate Unchanged, Net Charge-Off Rates Lower

Delinquent loans rose from $6.7 billion in June to $6.9 billion as of September 30, 2018. The delinquency rate was unchanged between June 2018 and September 2018 at 0.67 percent.

Net charge-offs were $4.2 billion as of September 2018. If annualized, it would equate to $5.6 billion. The net charge-off rate was 0.57 percent. In comparison, the net charge-off rate was 0.60 percent as of June 2018.

Read the Quarterly Credit Union Data Summary.

NCUA Financial Trends in Federally Insured Credit Unions.