Credit union loans grow, but so do ‘warning signs’ among other key indicators in first quarter

Credit unions saw healthy growth in loans during the year’s first quarter, but other performance indicators – including net income, provision for loan losses, and delinquencies – showed some warning signs, according to numbers released Thursday by their federal regulator.

The National Credit Union Administration (NCUA) said total loans outstanding in federally insured credit unions jumped up by 17.6% at the end of the first quarter, for $229 billion, compared to the year before. Compared to the quarter before (fourth quarter of 2022), loans were up 1.5%, for $23.5 billion.

However, other key indicators showed some declines. According to the first quarter numbers, net income for the credit unions in the 2023 first quarter was $17.7 billion at an annual rate, down $0.6 billion, or 3%, from the first quarter of 2022. Interest income was up $28.0 billion, or 45.8% since the year before, but non-interest income declined $0.3 billion, or 1.3%, to $24.0 billion annualized. NCUA said that was due partly to a drop in other income.

The provision for loan and lease losses or credit loss expense increased $5.9 billion, or 203.3%, the agency said, to $8.8 billion at an annual rate in the first quarter of 2023.

The net charge-off ratio was 52 basis points (bp) in the 2023 first quarter, up 24 bp compared to the first quarter of 2022. The loan delinquency rate was 53 basis points in the first quarter of 2023, up 10 bp compared with the first quarter of 2022, NCUA said.

Agency Board Chairman Todd Harper pointed to the delinquency rate rise, among others, as “warning signs flashing on the horizon.” He also noted a rise in home equity lines of credit and credit card balances (up 15.1% from the year before). “Credit unions must remain nimble in this high interest rate environment and work with members to navigate through any economic challenges that lie ahead,” Harper said.

Other first quarter numbers for credit unions showed:

  • Total assets were $2.2 trillion, up 4.4% from the same quarter a year before;
  • Total memberships were 136.6 million, up 4.3% from the year earlier;
  • The number of credit unions was 4,712, down 3.9% from the previous year.

NCUA Releases First Quarter 2023 Credit Union System Performance Data