Credit unions overall saw their assets, loans and savings totals grow in the first quarter, but ongoing challenges will combine to lower earnings, loan growth and credit quality over the rest of the year, their federal regular warned Tuesday.
The report also showed that more than nine in 10 of all credit unions (except for the very largest) were losing memberships, and the smallest credit unions saw declines in net worth.
Reporting on results of first-quarter call reports, the National Credit Union Administration (NCUA) said total assets in federally insured credit unions rose to $2.12 trillion, up $169 billion (8.7%) over the year ending in the first quarter of 2022. Total loans outstanding increased to $1.30 trillion, a $136 billion (11.7%) increase, and insured shares and deposits rose to $1.69 trillion, a $125 billion increase (8%) from the same point in 2021.
But NCUA Board Chairman Todd Harper (whose confirmation for a new term ending April 10, 2027, as a member of the agency board is up for consideration by the Senate, perhaps this week) threw some cold water on the credit union growth numbers.
“Lending remained strong, and we continued to see low delinquency and charge-off rates,” Harper said in a statement. “That said, ongoing supply chain disruptions, rising interest rates, inflationary pressures, and geopolitical turmoil will likely combine to lower earnings, loan growth, and credit quality in the months ahead. Credit unions, therefore, must remain nimble to navigate through this challenging economic environment.”
The agency noted that net income was down for federally insured credit unions at the end of the first quarter, totaling $18.1 billion at an annual rate, a decrease of $1.6 billion (8.2%) from the first quarter of 2021. While interest income rose to $61.0 billion, up $3.3 billion (5.7%) over the year, non-interest income fell to $24.3 billion, down $2.0 billion (7.5%), largely due, the agency said, to a drop in “other income.”
However, overall net worth for credit unions, the agency reported, increased to $216.4 billion, up $21.1 billion (10.8%) over the year. The aggregate net worth ratio — net worth as a percentage of assets — stood at 10.22% in the first quarter of 2022, up from 10.02% one year earlier, NCUA said.
Continuing a recent trend, the NCUA numbers show that larger credit unions are seeing most of the growth, and smaller credit unions (those with less than $1 billion in assets) struggling in membership growth and, in some cases, net worth increases.
For example, the call report shows that credit unions counted 131 million memberships at the end of the first quarter. Those credit unions with assets of more than $1 billion (410 total) showed membership growth of 8.1% — but all the five asset categories below that showed membership declines.
Those five categories are: $500 million to less than $1 billion (291); $100 million but less than $500 million (1,084); $50 million but less than $100 million (694); $10 million but less than $50 million (1,511); and less than $10 million in assets (1,014). Together, those credit unions make up 91.6% of the 4,903 federally insured credit unions at the end of the quarter.
The smallest group saw a membership decline of 12% — the largest drop — and the number of credit unions in that group fall from 1,105 to 1,014.
At the same time, the three smallest asset categories saw their net worth decline, by 1.9%, 5.5% and 5.6%, respectively.