Credit Union Lending Grew by 10.1 Percent over the Last Year

The National Credit Union Administration reported today that lending at federally insured credit unions grew by 10.1 percent over the last year.

Total outstanding loans were $695.3 billion at the end of the third quarter. NCUA reported that all major loan categories grew in the third quarter.

Year-over-year,

• New auto loans grew 19.4 percent to $82.4 billion.
• Used auto loans increased 12.2 percent to $140.3 billion.
• Net member business loan balances rose 12.6 percent to $50.4 billion.
• Non-federally guaranteed student loans expanded 21.9 percent to $3.1 billion.
• First mortgage real estate loans reached $286.4 billion, up 9.1 percent from a year earlier.
• Second-mortgage loans rose 1.1 percent for the year ending September 30 to $71.5 billion.

However, strong loan growth (3.2 percent for the third quarter) coupled with a decline in deposits and shares in the third quarter caused the loan-to-share ratio to increase by 238 basis points to 74 percent, the highest ratio since the fourth quarter of 2009.

The growth in loans in the third quarter was funded by a contraction in cash and short-term investments, which as a percent of assets fell 142 basis points during the quarter to 13.07 percent.

Deposits and shares fell by slightly more than $1.2 billion during the quarter to $939.1 billion as of September 30, 2014. However, deposits and shares were up $33.8 billion over the last year.

The net long-term asset ratio of credit unions improved falling 80 basis points over the last year to 35.03 percent. However, the agency warned that high levels of long-term investments in the asset portfolio could pose interest-rate risk for credit unions as interest rates rise.

Net income through the first nine months of 2014 was $6.8 billion, up 8.6 percent from a year earlier. The return on average assets ratio rose to an annualized 83 basis points through the end of the third quarter, a slight increase from the previous quarter and 3 basis points above the third quarter of 2013.

Better net interest margins and lower operating expenses (as a percent of average assets) positively contributed to the higher return on average assets, while lower fee and other income (as a percent of average assets) negatively impacted the return on average assets.

The aggregate net worth ratio for federally insured credit unions was 10.93 percent at the end of the third quarter, 17 basis points higher than the previous quarter and 28 basis points higher than the end of the third quarter of 2013. NCUA reported that 97.5 percent of federally insured credit unions had a net worth ratio at or above the statutorily required 7 percent level. Only 43 credit unions were undercapitalized at the end of the third quarter with 7 credit unions critically undercapitalized and 9 credit unions significantly undercapitalized.

Delinquency and net charge-off ratios for federally insured credit unions were essentially flat between the end of the second quarter and the end of the third. The delinquency ratio remained at 0.85 percent, while the net charge-off ratio fell by 1 basis point to 48 basis points.

Read the press release.