Credit unions log $11 billion in third-quarter net income; insured-share growth slows

Federally insured credit unions (FICUs) saw total assets grow $37.8 billion, or 2.2%, to a total of $1.79 trillion in the quarter ending Sept. 30 and reported $11 billion in net income, according to data released Friday by the institutions’ federal regulatory agency.

While 17% higher than second-quarter net income, the third-quarter 2020 figure was down $3.7 billion, or 25.1%, from the same period one year ago, the data shows. The NCUA attributed this decline primarily to increased provisioning for loan and lease losses or credit loss expenses.

Insured shares and deposits were up $32 billion, or 2.3%, from the second quarter, slowing significantly from the $105 billion in growth logged during the second quarter. Year over year, insured shares were up $213 billion, or 17.7%, to more than $1.4 trillion.

The NCUA is monitoring insured-share growth for any need to assess a premium in coming months to shore up the National Credit Union Share Insurance Fund (NCUSIF) equity ratio. In September, the agency reported that the fund’s equity ratio, primarily due to rapid insured-share growth, had dropped 13 basis points (bp) in the first half of the year to 1.22% – close to the 1.2% minimum below which the agency would be required to establish a restoration plan.

Friday’s FICU data release also shows:

  • Total assets in federally insured credit unions rose by $248 billion, or 16.1%, over the year ending in the third quarter of 2020.
  • Total deposits in FICUs grew $38 billion, or 2.5%, from the second quarter to the third quarter of 2020 and $236 billion, or 18.3%, from the same time one year ago.
  • Total loans outstanding increased $19.1 billion, or 1.7%, during the third quarter and $69 billion, or 6.3%, over the year, rising to a total of $1.2 trillion. The average outstanding loan balance in the third quarter of 2020 was $16,293, up $767, or 4.9%, from one year earlier.
  • Net interest margin was $48.1 billion in the third quarter of 2020, or 2.87% of average assets. That compares with $47.7 billion, or 3.19% of average assets, in the third quarter of 2019.
  • Return on average assets (ROAA) for FICUs was 66 basis points (bp) in the third quarter of 2020, up from 57bp in the previous quarter but down from 98bp in the third quarter of 2019. The median return on average assets across all federally insured credit unions was 42bp, up 3bp from the previous quarter but down 23bp from the third quarter of 2019.
  • The delinquency rate at FICUs was 55bp in the third quarter of 2020, down 3bp from the second quarter and 11bp from one year earlier. The net charge-off ratio was 48bp, down 5bp from the second quarter and 55bp from the third quarter of 2019.
  • The loan-to-share ratio stood at 75.6% in the third quarter of 2020, down from 76.3% in the second quarter and 84.1% in the third quarter of 2019.
  • The credit union system’s net worth ratio was 10.43% in the third quarter of 2020, down from 10.46% in the second quarter and 11.38% one year earlier.
  • Cash and equivalents (assets with maturity of three months or less) increased $93.3 billion, or 80.6%, over the one-year period to $209.1 billion.
  • Total investments (instruments with maturities in excess of three months) rose $75.6 billion, or 29%, over the one-year period to $336.6 billion.

There were 5,133 federally insured credit unions as of Sept. 30, the data shows, down from 5,164 as of June 30 and 5,281 a year ago.

NCUA Quarterly Credit Union Data Summary (2020 Q3)

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