Credit unions see growth in assets, savings and loans – but credit quality shows signs of flagging

Credit unions saw growth in assets, savings and – especially – loans last year, but also saw their return on average assets fall and experienced greater delinquencies and charge-offs from the year before, according to figures released Wednesday by their federal regulator.

Federally insured credit unions held $2.17 trillion in assets at year-end 2022, the National Credit Union Administration (NCUA) reported as it released fourth-quarter and full-year statistics for last year. The asset growth was 5.2% from the previous year, fueled largely by 3.1% growth in insured shares (savings) and deposits of $61.3 billion (to a total of $1.85 trillion), the agency said.

Loans expanded by a whopping 20% last year, NCUA said, to $1.51 trillion – a $251 billion increase from total loans of the previous year.

However, much like the banking industry (whose regulator released banks’ year-end numbers last week), credit quality among credit unions seems to be fading. The agency said the delinquency rate at federally insured credit unions was 61 basis points (bp) at the end of 2022, up 12 bp from one year earlier. The net charge-off ratio was 34 bp, up 8 bp compared with the end of 2021.

Meanwhile, return on average assets (ROAA, widely considered the basic yardstick of profitability at financial institutions) was 89 bp at year-end, down from 107 bp in 2021. The median return on average assets, the NCUA added, across all federally insured credit unions was 51 basis points, up 1 bp from 2021.

In a statement, NCUA Board Chairman Todd Harper indicated that economic activity is cooling and that credit unions should keep on their toes. “As rates increase in the current economic environment, so does the associated risk that makes short-term liquidity events possible,” Harper said. “The potential for sudden changes in either inflation, the rate environment, or the economy means that credit unions must remain nimble in the months ahead.”

The NCUA also reported that federally insured credit unions counted 135.3 million memberships at year-end 2022 (up about 4.5% from the previous year) and that there were 4,760 credit unions at year’s end, down 182 institutions (about 3.7%) from last year.

NCUA Releases 2022 Fourth Quarter Credit Union System Performance Data

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