CUs Report Record Net Income of $13 Billion for 2018

The National Credit Union Administration reported record net income for federally insured credit unions (FICUs) of $13 billion in 2018. This is up $2.7 billion from the same period a year ago.

For 2018, interest income rose by 13.8 percent and nonineterest income was up 9.3 percent. Interest expense jumped by 29.4 percent in 2018, while nonineterest expenses advanced by 8.8 percent.

Only 631 FICUs reported a loss for 2018.

FICUs reported a return on average assets (ROAA) of 92 basis points for 2018. In comparison, ROAA for 2017 was 78 basis points.

Factors helping to drive the improved profitability of FICUs during 2018 were higher net interest margin (+14 basis points), increase in fee and other income (+ 5 basis points), and a decline in provision for loan and lease losses (-2 basis points). Factors that reduced profitability were a 5 basis point increase in operating expenses and 1 basis point decrease in non-operating income.

The median ROAA was up 19 basis points from a year ago to 57 basis points at the end of 2018.

FICUs saw an increase in net worth in 2018.

Due to higher earnings, FICU net worth increased by 8.8 percent for 2018 to $164.3 billion. FICUs saw an 18.59 percent in secondary capital during 2018 to almost $265 million. Credit unions with a low-income designation can issue secondary capital. As of December 2018. 2,554 credit unions had a low-income designation.

The industry's net worth ratio increased from 10.95 percent at the end of 2017 to 11.30 percent as of December 31, 2018.

As of December 2018, 98.59 percent of FICUs have a net worth ratio of at least 7 percent, the minimum requirement to be well-capitalized. On the other hand, 3 credit unions had a net worth ratio below 2 percent.

FICUs reported an increase in assets, loans, shares, and members during 2018.

Year-over-year,

• Assets increased by 5.4 percent to $1.45 trillion.
• Loans grew by 9 percent to over $1 trillion.
• Deposits and shares increased by 5.2 percent to $1.22 trillion.
• Membership grew by 4.4 percent to 116.2 million members.

All major loan categories at FICUs expanded during 2018. FICUs granted $506.5 billion in loans during 2018.

Outstanding indirect loans grew by 14.1 percent during 2018 to $222 billion. Approximately 21 percent of all loans were indirect loans.

Because loan growth outpaced the growth in shares and deposits, the loan-to-share ratio rose from 82.6 percent at the end of 2017 to 85.6 percent at the end of 2018.

To help finance the growth in loans, FICUs reduced their investments and holdings of cash and cash equivalents in 2018. As a result, cash plus short-term investments as a percentage of assets fell from 12.43 percent in 2017 to 11.36 percent in 2018.

FICUs saw a decline in delinquent loans during 2018.

Delinquent loans fell from $7.78 billion at the end of 2017 to $7.42 percent at the end of 2018. The delinquency rate was 71 basis points at the end of 2018 compared to 81 basis points from a year earlier.

However, net charge-offs increased by 5.9 percent during 2018 to $5.76 billion at the end of 2018. The net charge-off rate fell by 2 basis points during 2018 to 0.58 percent.

FICUs reported a 5.1 percent increase in allowance for loan and lease losses during 2018 to $9.26 billion. Due to the decline in delinquent loans and the increase in allowance for loan and lease losses, the industry's coverage ratio rose from 113.25 percent in 2017 to 124.73 percent in 2018.

Read NCUA's Quarterly Credit Union Data Summary.

Read NCUA's Financial Trends Report.