Credit union assets hit $2.2 trillion, loans $1.56 trillion in Q2, but higher delinquency rate and charge-offs noted

A note of “cautious optimism” was struck by the chairman of the federal credit union regulatory agency Thursday regarding second-quarter call report data from federally insured credit unions (FICUs).

National Credit Union Administration (NCUA) Board Chairman Todd Harper pointed to growth, since the second quarter of 2022, in credit union assets, memberships, loans and insured shares and deposits. But he also noted areas of concern, “Namely, a rise in delinquency rates and charge offs and a slight decline in insured shares.”

Just looking at second-quarter 2023 growth, insured shares and deposits declined from about $1.73 trillion in the first quarter to $1.72 trillion in the second, for a decrease of about 0.5%. The delinquency rate rose 10 basis points from the first to second quarters; it was up 15 basis points from second-quarter 2022, the agency’s report shows.

NCUA, in its press release and its quarterly data summary narrative, focuses primarily on trends over the four quarters ending this June 30. However, several pages in, the data summary provides quarterly results going back to 2017.

In its press release, the NCUA said credit unions’ second-quarter 2023 call report data showed total assets up 3.8%, to $2.22 trillion, from June 30, 2022, to June 30, 2023; total loans outstanding up 12.6% to $1.56 trillion; and total shares and deposits up 1.2%, by $23 billion, to $1.88 trillion.

The agency’s data report showed that insured shares and deposits totaled about $1.69 trillion at the end of June 2022, so insured shares and deposit grew about 1.8% over the four quarters; the percentage of growth declined 5.2%.

Details on the other areas of concern noted by Harper included:

  • Delinquencies: The delinquency rate at FICUs was 63 basis points in the second quarter of 2023, up 15 basis points compared with the second quarter of 2022. This breaks down as follows:
    • The delinquency rate on non-commercial real estate loans was 44 basis points in the second quarter of 2023, 4 basis points higher than in the second quarter of 2022.
    • The credit card delinquency rate rose to 154 basis points from 107 basis points one year earlier.
    • The auto loan delinquency rate increased 22 basis points over the year to 67 basis points in the second quarter of 2023.
    • The delinquency rate for commercial loans excluding unfunded commitments was 42 basis points in the second quarter of 2023, unchanged from a year earlier.
  • Charge offs: The net charge-off ratio for all FICUs was 53 basis points in the second quarter of 2023, up 24 basis points compared with the second quarter of 2022.

In other data, the agency reported:

  • Net income for FICUs totaled $17.4 billion in the first half of 2023 at an annual rate, down $0.4 billion, or 2.1%, from the first half of 2022.
  • Interest income rose $28.8 billion, or 45.3%, over the year to $92.3 billion at an annual rate in the first half of 2023.
  • Non-interest income grew $1.2 billion, or 4.9%, to $24.5 billion annualized, largely due to an increase in other non-interest income.
  • The annualized return on average assets (ROAA) for FICUs was 79 basis points in the first half of 2023, down from 85 basis points in the first half of 2022. The median annualized ROAA was 66 basis points, up 24 basis points from a year earlier.
  • The credit union system’s provision for loan and lease losses or credit loss expenses increased $5.8 billion, or 169.5%, to $9.2 billion at an annual rate in the first half of 2023.
  • Within total shares and deposits, regular shares declined by $75.1 billion, or 10.9%, to $614.1 billion. Other deposits increased by $97.5 billion, or 12.5%, to $879.9 billion, led by share certificate accounts, which grew $164.5 billion, or 68.6%, over the year to $404.5 billion.
  • The credit union system’s net worth increased by $13.2 billion, or 5.9%, over the year to $235.9 billion. The aggregate net worth ratio – net worth as a percentage of assets – stood at 10.63% in the second quarter of 2023, up from 10.42% one year earlier. Beginning in the first quarter of 2023, this ratio excludes the current expected credit loss (CECL) transition provision, the agency said.

The number of FICUs declined to 4,686 in the second quarter of 2023, from 4,853 in the second quarter of 2022; the number of low-income-designated FICUs declined 35 to a total of 2,585. The number of complex FICUs (total assets greater than $500 million) grew by five to 708. The agency also said memberships in FICUs rose 5.1 million to a total of 137.7 million over the year.

Release: Credit Union Assets, Lending, and Delinquencies Rise in 2nd Quarter

Quarterly data summary for Q2